‘25pc excise duty will put cooking oil beyond Kenyans’ reach’, companies warn

Cooking oil

Edible oil manufacturers have opposed the proposed 25 per cent excise duty on raw and refined oil. 

Photo credit: Shutterstock

The Association of Edible Oil Manufacturers has warned that the price of cooking oil will rise beyond the reach of a majority of Kenyans with the imposition of 25 per cent excise duty as proposed in the Finance Bill 2024.

The Bill, currently before the National Assembly, proposes 25 per cent excise duty on both raw and refined vegetable oils.

In a letter to Parliament, the manufacturers warn that if the Bill is passed in its current form, it will “unleash widespread economic and social harm across various sectors of the country” that depend on refined and raw vegetable oils.

“If implemented as proposed, this excise duty will trigger an unprecedented surge in the price of cooking oil, a staple in Kenyan households,” the edible oil association said as it urged MPs to shoot down the “draconian” proposal.

“In light of these grave implications, we urgently call upon the government to scrap the proposed 25 per cent excise duty on vegetable oils from the Bill. This tax is not just an economic miscalculation but a potential humanitarian crisis that Kenya cannot afford,” the association said.

It noted that cooking oil is a fundamental ingredient of food items such as bread and mandazis, meaning that the tax will have a cascading effect.

The Bill also proposes imposition of excise duty on locally manufactured items made of plastics, introduction of an eco levy on plastic packaging materials and Import Declaration Fee (IDF).

The plastics proposed for taxation are used in the packaging and storage of cooking oil, which is likely to further escalate the cost of the commodity.

“The cost of this essential commodity is projected to skyrocket by over 90 per cent, rendering it unaffordable for millions of Kenyans, particularly the low-income earners and small-scale traders, commonly known as hustlers and mama mbogas,” said the association.

Finance Bill 2024

Clause 42 (P) of the Finance Bill 2024 seeks to amend the first schedule to the Excise Duty Act to impose 25 per cent tax on both raw and refined vegetable oils. Part G of the clause proposes the imposition of 10 per cent excise duty on some locally manufactured articles of plastic.

The Bill also seeks to introduce an eco levy at the rate of Sh150 per kilogramme on all articles of plastic packaging materials. According to the association, to manufacture one 20-litre oil container requires one kilogramme of plastic material.

The Bill seeks to amend section 7 of the Miscellaneous Fees and Levies Act to increase IDF from 2.5 per cent to 3 per cent. Further, it proposes to repeal section 14 of the Excise Duty Act on relief for raw materials but does not propose to offset the excise levied on raw materials against excise on finished products.

The implication of the proposed excise duty adjustments on raw and refined vegetable oils, the association said, will see the price of a 400 gramme loaf of bread increase by Sh10 compared to the current Sh70. The ripple effects extend beyond the kitchen, affecting other essential products derived from vegetable oils, with the price of a bar soap likely to rise from Sh200 to ShSh350 and 250 grammes of margarine from Sh160 to Sh300.

High cost of living

“Such price hikes will disproportionately affect the most vulnerable members of society, exacerbating the already high cost of living and plunging millions into deeper financial distress,” the manufacturers said.

The association further warned that the excise duty proposal threatens to dismantle the government’s own agenda of promoting local value addition in agribusiness and stifle the growth of local edible oil production.

The edible oils sector is a significant contributor to Kenya’s economy, directly employing approximately 10,000 people and indirectly supporting over 30,000.

“The proposed tax risks decimating these livelihoods and destabilising the manufacturing industry at large,” said the manufacturers.