Treasury plots 300pc stamp tax hike on alcohol, makeup
Wednesday January 18 2023
Times Tower in Nairobi, the headquarters of Kenya Revenue Authority on this picture taken on September 15, 2020. PHOTO | DENNIS ONSONGO | NMG
Consumers ought to brace for a contemporary spherical of value will increase on alcohol, juices, cosmetics and cigarettes if a proposal by the National Treasury to boost the worth of excise stamps by as much as 4 instances is accepted.The Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 proposes to boost the stamp charges for cosmetics from 60 cents per stamp to Sh2.50 — a margin of 317 % — whereas the stamp charge for fruit juices and non-alcoholic drinks similar to sodas will go up by 267 % to Sh2.20 from 60 cents.The value of a stamp affixed on a beer bottle will double to Sh3 from Sh1.50, whereas these for spirits, wines and tobacco merchandise are set for a 79 % rise to Sh5 from the present Sh2.80 per stamp.These greater stamp costs will probably be handed all the way down to the ultimate shopper by producers and importers, much like different excise expenses, including to the current 6.3 % adjustment for inflation that got here into impact final October and the standard charge revisions contained within the annual funds.This is the primary assessment of the stamp costs since 2017, with the Treasury in line to rake in additional billions from the estimated 2.9 billion excise stamps that the Kenya Revenue Authority (KRA) sells for obligatory affixing on excisable merchandise.Read: New beer, juice and beauty taxes kick in
The excise stamps are supposed to deter counterfeiting and allow monitoring of excisable items alongside the provision chain, which helps the taxman compute the excise due from producers and importers.Tax consultants say the transfer to boost the stamp charges is indicative of stress going through the Treasury to boost tax collections however that it raises the danger of elevated use of faux stamps, which is already a serious headache for the KRA.“The rationale is prone to be stress from the federal government to gather extra income — we’ve got seen KRA being given an bold income goal and the federal government state an intention to turn into self-reliant towards borrowing,” mentioned Stephen Waweru, senior supervisor of tax companies at KPMG Kenya.“On the opposite hand, it’d set off extra folks to hunt loopholes by means of counterfeits since below the present financial surroundings of excessive inflation few have room to pay extra to authorities…the timing might be unsuitable.”Excise obligation, being a consumption tax, reaches a wider vary of the inhabitants and is difficult to keep away from for a shopper, offering the federal government with a sexy goal in its bid to boost extra taxes.Sin taxes normally present the Treasury with low-hanging fruits when it desires to boost taxes within the nationwide funds.
Beer, as an example, at present attracts excise on the charge of Sh142.44 per litre, having gone up from Sh121.85 within the fiscal yr to June 2021, reflecting a rise of Sh12.15 per litre within the June 2022 funds and a subsequent inflation adjustment of 6.3 % in October.Excise on wines has risen from Sh208.20 to Sh243.43 per litre within the interval, whereas tax on spirits has gone up from Sh278.70 to Sh356.42 per litre. Excise on fruit juices has within the meantime risen to Sh14.14 per litre from Sh12.17.The multi-billion-shilling cosmetics and wonder merchandise business, which has seen an increase in spas in recent times, has additionally been slapped with an increase in obligation on merchandise to fifteen from 10 %.The value of imported jewelry similar to necklaces, earrings, bracelets and rings additionally attracts an obligation of 15 %, in contrast with 10 % beforehand.In the yr ending June 2022, the KRA collected Sh256.3 billion in excise taxes, equal to 13 % of the KRA’s whole income assortment of Sh2.03 trillion.Value-added tax contributed Sh520.4 billion to the tax pile, whereas payroll and company taxes contributed Sh461.8 billion and Sh416.7 billion, respectively.For the KRA, the drive to develop the takings from sin taxes has been hampered by a proliferation of faux excise stamps that enable rogue producers and importers to evade paying up, giving them an enormous market benefit over compliant companies.Read: Why alcohol producers combat to cheat excise taxesSpeaking final October, President William Ruto mentioned the nation must be promoting between 10 and 12 billion excise stamps yearly however expressed concern that the KRA is just shifting 2.9 billion stamps with the rest being produced by counterfeiters.Earlier, the KRA had estimated that it loses as much as Sh12 billion yearly from excise obligation evasion from the native manufacturing sector.→ [email protected]