Businesses in fresh push for a policy on tax raises
Cosmetics shops on Dubois Road in Nairobi in August 2020. The taxman is seeking a piece of the rapidly growing cosmetics and beauty industry.
Industrialists and traders have steeped a push for the implementation of a new tax policy following three rounds of unforeseen tax raises by the National Treasury in one and a half years.
The call follows last week’s move by Treasury Cabinet Secretary Njuguna Ndung’u to gazette the Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 that set new fees charged on 14 categories of excisable goods, including cosmetics, fruit juices, and alcohol.
The new stamp charges came barely five months after a 6.3 percent inflation adjustment on specific excise tax rates that was effected on October 1, 2022, impacting cosmetics, confectionary, alcoholic and non-alcoholic beverages, including bottled water, and tobacco and nicotine products.
Three months before the inflation adjustment, there was an increase in excise taxes from July 1, 2022, by between 10 percent and 20 percent through the Finance Act 2022.
The business groups now say the haphazard tax changes are affecting their operations and demand the implementation of a national tax policy to guarantee predictability.
“We urge the government to finalise and implement the National Tax Policy, with a focus on enhancing certainty and predictability in the tax code,” said Rajan Shar, chairman of the Kenya Association of Manufacturers.
The Treasury last year collected views on a draft national tax policy, though it is yet to bring forth the final product from its engagement with stakeholders. The policy is expected to address the current knee-jerk reactions to tax policies and measures which are not sustainable for businesses that require certain, predictable, and simple tax systems.
Analysts argued that sudden changes in fiscal policy and regulations divert the industry’s resource allocation from productivity to meeting the costs associated with changes toward fast compliance.
The new stamp fee for cigars, tobacco substitutes, electronic cigarettes and other tobacco products has been set at Sh5 per stamp as well as that of liquid nicotine, products containing nicotine, wines, and alcoholic beverages made from fermented fruits.
This is a sharp increase from the Sh2.80 stamp fee that cigarette products were being charged.
The Treasury has also set the fee for compounded alcohol spirits with a strength of more than six percent at Sh3 per stamp down from the Sh5 it had proposed in January.
Beauty products
Alcohol has been attracting a stamp fee of Sh2.80 per stamp.
This is also a significant increase from the Sh0.6 per stamp that cosmetics and beauty products have been attracting.
Manufacturers are already scrambling to set new prices after the Treasury gazetted new excise stamp fees.
British American Tobacco Kenya (BAT Kenya) says it is reviewing its position on the new stamp rates but warned that the higher duties could lead to consumers switching to cheaper illicit products as manufacturers pass on the added cost to consumers.
