Power tariff rise, new taxes squeeze loom

Kenyans will from Monday start paying more for mobile money transfers, chocolates, kerosene and bottled water as the new excise tax measures that Treasury secretary Henry Rotich put in the budget kick in.

The pain of higher excise taxes and the resulting higher pricing of consumer goods is going to be deepened by the looming upsurge in electricity bills when the new billing structure comes into force.

Mr Rotich picked July 1 as the commencement date for a raft of tax changes he proposed in the new financial year that started on Sunday.

Importers of private vehicles with engine capacities above 2500cc also face steeper excise duty of 30 per cent, a 10 per cent rise from the previous level.

Mr Rotich followed his budget statement with publication of a legal notice giving the taxman the leeway to start collecting select excise taxes at new rates even before MPs approve the Finance Bill 2018, which bears the tax change proposals.

The publication of the notice enables the Treasury to collect the tax billions it would have missed as it awaits parliamentary approval of the proposed tax measures.

Excise tax on mobile money transactions are from today set at 12 per cent from 10 per cent while kerosene is charged excise tax at Sh10.31 from Sh7.21 per litre.

The tax measure is expected to hit millions of low-income households that rely on the commodity for lighting and cooking hardest. Beginning today, sugar confectionery and chocolate bars are attracting excise duty at the rate of Sh20 per kilogramme.

READ: Rotich steps ahead of MPs to charge new taxes

Middle-class homes are, however, facing yet another painful price escalation in electricity charges – a mix that could potentially exert inflationary pressure across all segments of the economy and erode purchasing power in many households.

The Energy Regulatory Commission (ERC) last Friday published a new electricity billing structure that will see monthly power bills nearly double for certain segments of the customer base, in violation of its earlier promise that the charges would fall.

The proposed tariffs have effectively reversed President Uhuru Kenyatta’s Jubilee government pledge to keep power bills low and ease the cost of living for households.

READ: Sweets and chocolate firms sue over new taxes

Under the new tariff structure, homes that consume 50 kilowatt hours (kWh) of electricity per month will pay nearly double (Sh1,247) the Sh691 they paid last month.

Consumers of 200 units of power will be billed Sh4,988, up from Sh4,106 in June, based on all charges in the billings, including 16 per cent valued added tax (VAT) and adjustable costs.

“There is an increase in the domestic category but this is still a draft for public discussion,” ERC director-general Pavel Oimeke said.

The tariff review was to remove billing fluctuations, especially for customers on prepaid meters by creating uniform prices.

It was expected to remove the segmentation of tariffs for customers based on power consumption levels and introduce harmonised rates but now looks set to come with higher billings.

READ: Poor homes to pay more as electricity subsidy scrapped

The majority prepaid customers have been experiencing wild fluctuations during the purchase of electricity tokens at different times of the month, denying them the ability to predict their costs and budget properly.

It has now emerged that with the new tariffs, which the ERC had promised would cut costs across board, only the smallest power users (below 15 units a month) will enjoy double-digit drops in monthly billings.