President Kenyatta’s move to reject lower duties proposed by MPs in the Excise Duty Bill, 2015 means that Kenyans should be prepared to pay more for beer, cigarettes, used cars and motocycles.
Economists always use beer and cigarettes, two habitual products to raise more revenues as they know that people will still consume them. It should be noted that as the government is struggling to raise taxes to boost its ballooning expenditure and appetite for funding infrastructural projects, now demanding at least sh2 trillion and with lower tax collections from the Kenya Revenue Authority (KRA) Kenyans will feel this pinch.
President Kenyatta’s proposal on higher taxes are contained in a memo to MPs following his rejection of the Bill passed in Parliament, arguing that the lawmakers’ move would make it difficult to raise additional Sh25 billion from the items.
“The deletion of the item (fruit juices, cigarettes, motor vehicles, motor cycles) will, therefore, adversely affect the revenues to be collected making it inconsistent with the approved fiscal framework and Division of Revenue Act,” Mr Kenyatta said in a memorandum to the National Assembly outlining reasons for refusing to assent to the Bill.
MPs have yet to marshal two thirds of its numbers (233) to differ with the President’s memo in the time of the 11th Parliament. It is therefore expected that on this, they will fail to raise the numbers, affirming the President’s wisdom in raising the over sh25 billion.
This means importers of used car and motorcycle as well as cigarettes and fruit juice manufacturers have lost their bid to lower the higher taxes introduced by Treasury secretary Henry Rotich in June to cater for the current year’s budget. Treasury introduced a Sh200,000 excise tax on all vehicles more than three years old from the date of first registration and Sh150,000 for newer vehicles.
This adjustment replaced the existing 20 per cent excise tax based on a vehicle’s value, which is charged alongside customs and value added tax.
Motorcycles will also attract excise tax at Sh10,000 a unit.
Taxes on beer go up by at least 42 percent. Currently, they are charged at about sh70 per litre.