Kenyans face more economic hardship as new taxes pile up
Poor Kenyans will be forced to pay more for Kerosene and drink cheap and harmful liquor after imposition of new 5 per cent excise duty on products.
The price of one tonne of Kerosene has increased by Sh535, meaning that a litre of kerosene will increase by Sh0.54.
Consumers will also pay Sh6 more for a litre of beer and products with alcohol content not exceeding six per cent while prices for spirits will rise by Sh12.50
Kenya Revenue Authority (KRA)’s inflation tax is also expected to indirectly hit poor Kenyans as manufacturers pass on the cost of doing business to consumers.
Bars and restaurant operators that employ will also have to pay more to stay in businesses after Coronavirus lockdowns shut their enterprises.
The 4.94 per cent excise duty which also affects alcoholic products such as beer, wines and spirits could hit the already struggling bar and restaurant businesses, reducing their ability to employ Kenyans.
Other targeted goods are industrial fuel, petrol and jet fuel. Manufacturers say the cost of doing business will increase at a time when they struggling with Covid-19 shocks.
Through a public notice, KRA informed manufacturers and importers that the rates of excise duty on excisable goods that have a specific rate of duty, have been adjusted using the average inflation rate of 4.94 per cent for the financial year 2019/2020.
This means that Kenyans will also shoulder more indirect taxes as manufacturers pass on new taxes on fuel that is for production of industrial products.
Manufacturers of confectionaries such as candies, biscuits, fruit juices will see higher production costs even as they struggle to recover from the Covid-19 related problems.
Rate of inflation
The law demands that excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the previous financial year.
Annual adjustment of the rate for inflation took effect on October 1 despite opposition from manufacturers who had sought a hold of previous rate as cushioning from effects of the pandemic.
Beer distributors had asked the taxman along with National Treasury to reconsider implementing the adjustment as the sector sought to recover from restrictions which saw bars and entertainment joints close their doors for the better part of six months.
Bar operators who have suffered prolonged periods of closures will have to put up with higher costs of doing business.
Kenya Association of Manufacturers, had urged KRA to pause implementation of the annual inflation adjustment tax that affects excisable goods, citing economic hardships as a result of Covid-19 crisis.
“KRA should not implement the proposed inflationary adjustment rate from October 1, until after Kenya is declared pandemic-free and full recovery of excisable goods manufacturers achieved,” KAM chief executive Phyllis Wakiaga wrote in a letter to KRA Commissioner-General Githii Mburu.
