New tax raises kick in as inflation breaches CBK limits

The country’s inflation rate hit a 58-month high in June even as a wave of new tax increments kicks in today (Friday), pointing to further pressure on consumers and businesses.

The cost of living measure rose to 7.9 percent in June from 7.1 percent in May, the Kenya National Bureau of Statistics (KNBS) reported yesterday, exceeding the Central Bank of Kenya’s target ceiling of 7.5percent for the first time in almost five years.

The statistics office said the sharp rise in June is linked to increases in a jump in the price of essential items like cooking oil, food, fuel, and soap, squeezing household budgets and demand for goods and services.

“The rise in inflation was mainly due to increase in prices of commodities under; food and non-alcoholic beverages (13.8 percent); furnishings, household equipment and routine household maintenance (9.2 percent); transport (7.1 percent) and housing, water, electricity, gas and other fuels (6.8 percent) between June 2021 and June 2022,” KNBS stated.

During the month, prices for maize flour shot beyond Sh230- the highest prices ever witnessed, wheat flour beyond Sh200 and fuel up to Sh160 (super petrol).

KNBS figures on average prices during the month show that wheat flour was sold at an average of Sh186.9 from Sh165.89 in May, a litre of cooking oil Sh387.98 from Sh370.71 in May, and a 500ml packet milk Sh58.39 from Sh57.3 in May.

“Prices of wheat flour- white, carrots, and cooking oil (salad) increased by 12.7, 4.7, and 4.7 percent in June 2022, respectively. During the same period, prices of onions-leeks and bulbs and potatoes (irish) dropped by 5.3 percent and 4.8 percent, respectively,” KNBS stated.

The June inflation rate is the highest jump in inflation since February 2020 when it stood at 7.2 percent, reflecting the economic pain Kenyans have felt, which has been growing month after the other, despite their purchase power remaining constrained.

But the pain will continue even this month moving forward, considering that some of the tax measures passed in the Finance Act 2022 kick in today, which will see prices for some commodities including beauty products, alcohol, confectioneries, and mobile data increase.

The National Treasury proposed an increase in excise duty on beauty and cosmetic products and duty on chocolate bars by 15 percent, while duty on imported jewelry will now rise from 10 to 15 percent.

Sugar confectioneries such as candies chocolates, chewing gum, and bubble gum will also rise by 10 percent according to Treasury proposals effective today, with excise duty on fruit and vegetable juices also rising by 10 percent.

And users of mobile phone services will also witness a rise in cost after the government starts taxing sim-cards Sh50, and implements excise duty on imported smartphones, on top of 20 percent excise duty on telephone and internet data services that is already there.

Investors who sell properties will also face higher taxes after the Finance Act 2022 proposed a capital gains tax (CGT) at the rate of 15 percent, from 5 percent charged formerly. The tax is charged on the profit that an investor makes when an investment is sold.