KRA is in the process of collecting public views on the proposed implementation of the Inflation Adjustment of the specific rates of excise duty by 6.3 percent, which represents the average inflation rate recorded in the last 2021/2022 financial year to cushion the government’s revenues from being eroded by imported inflation.
KRA seeks to increase the rate of Excise Duty by 6.3 percent which represents the average inflation rate recorded in the last 2021/2022 financial year to cushion the government’s revenues from being eroded by imported inflation. Some of the products that are targeted for price increases include beer, bottled water, cider, fruit juices, berry and other fermented drinks.
Our considered opinion is that this is a move in the wrong direction because when the Finance Act 2022 was passed in July 2022, it contained an increase in the excise rates for beer and spirits by 10% and 20% respectively. At the same time, the KRA Commissioner General is required to adjust annually the specific rates of Excise Duty taking into account the rate of inflation. We find this to be an excessive over-taxation to the ordinary mwananchi who is looking at the government to cushion it from such vagaries.
Following the 10% and 20% excise increase on beer and spirits effected through the Finance Act 2022 in July 2022, alcohol consumption has declined in favor of illicit. We have observed a decline of 21% and 32% in barley and sorghum-based beers respectively, the global fuel prices and the war in Ukraine continue to put pressure on households that are already grappling with high commodity prices and cost of living.
Locally manufactured finished goods distribution and retail alcohol trade (which is dominated by Micro and Small Enterprises-MSMEs) is expected to lose KES 4.2Bn in reduction of raw material use, KES 15.7Bn in employment income loss, and 35,364 jobs will be lost. Increase in tax rates on alcohol also has an adverse effect on other sectors of the economy and indeed tax revenues from those sectors. The industry supports other sectors such as the tourism sector and the entertainment sector which play a big role in the economy in terms of employment and revenue generation.
BAHLITA, calls upon the new President of the Republic of Kenya, H.E Dr. William Samoei Ruto to intervene in this matter and allow for further stakeholder engagement in line with his campaign promises that were premised on lowering the cost of living and securing jobs for the ordinary Kenyans.