Tax netted from sweet makers falls to Sh10m

The taxman collected a paltry Sh10 million from the Sh20 per kilogramme of sugar confectionery tax after local manufacturers opposed it in court, delaying enforcement.

The Kenya Revenue Authority (KRA) had targeted to raise Sh473 million from the tax that oblige all manufacturers to pay excise duty on confectionery and chocolate products.

Local manufacturers opposed the tax rule that kicked off from July 1 2018 arguing that it did not make a distinction between locally manufactured goods and imported products.

“We didn’t collect from local manufacturers because they went to court posing a challenge on enforcement of the tax rule. We only collected taxes on imports and that is why it is only Sh10 million,” Caxton Masudi, the KRA deputy commissioner in charge of policy told Parliament.

In June last year, five local confectionery and chocolate product manufacturing companies sued the National Treasury, the National Assembly and the Attorney-General.

The companies -Candy Kenya limited, Kenafric Industries Limited, Kenya Sweets Ltd, Patco Industries Ltd and Mzuri Sweets ltd- challenged proposed financial regulations and imposition of excise duty on their goods.

They alleged that they have been exposed to penalties and are bound to be prejudiced.

Mr Masudi however told the National Assembly Finance Committee the issue of the products being uncompetitive in the regional or international market does not arise.

“The issue of competitiveness is not relevant in the introduction of excise duty on confessionaries,” he said.

He explained that products that go outside the country –which compete- with products in other countries do not contain excise duty.

Excise duty is a consumption tax and it cannot be exported. This means that the government cannot charge excise duty or VAT on items that are meant for export.

“Exise duty is only charged locally and when the other countries import into Kenya, then their products suffer excise duty,” he said.