The prices of some goods, including beer, bottled water, and juice, could rise from October 1 as the Kenya Revenue Authority (KRA) moved to effect annual inflation tax adjustment on excise duty charged on the products.
The taxman Thursday indicated excise duty on the products will increase by 6.3 per cent effective next month in line with average annual inflation.
“The specific rates will be adjusted using the average inflation rate for the financial year 2021/2022 of six decimal three per centum (6.3per cent), as determined by the Kenya National Bureau of Statistics, and the adjusted specific rates will be effective from October 1, 2022,” the KRA said.
The increase will see manufacturers pass on the additional cost of the commodities to end users in what may trigger outrage by most households that are yet to recover from the effects of the Covid-19 pandemic, which triggered layoffs, pay cuts, and business closures.
The adjustment is in line with the law that demands that excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June.
Various lobbies, however, since 2020 consistently urged the taxman to pause implementation of the annual inflation adjustment tax that affects excisable goods, citing economic hardships as a result of the Covid-19 crisis.
Before 2018, the affected goods had fixed excise rates, and the new inflation adjustment is seen as a means of protecting the government’s spending power from being eroded by the rising cost of living.
The KRA had on November 2 raised the duty charged on the products, including bottled water, juice, motorcycles, and beer, by 4.97 per cent to cover the inflationary erosion of collected taxes.
A court ruling subsequently stopped the taxman from implementing the new excise rate.
The KRA in December 2020 increased the cost of 30 products by at least 5.43 per cent prompting protests from traders including distributors of alcoholic drinks.
When delivering his budget proposal for 2022/23, Treasury Cabinet Secretary Ukur Yatani promised to empower KRA to exclude basic commodities from the tax reviews to cater for inflation this year. This means that KRA would not touch some products while reviewing taxes due to inflationary effects, one of the causes of an increase in taxes for basic commodities.
