The Treasury is looking to collect Sh6 billion from higher taxes levied on a range of items, including fuel, bottled water, juice and beer in October.
In a letter to the International Monetary Fund (IMF), Treasury Secretary Ukur Yatani wrote: “inflation adjustments to excise taxes introduced in October 2020… (have) an estimated revenue yield of Sh6 billion in FY 2020/21”.
The change is in accordance with the statute, which mandates that excise duty be increased in lockstep with the cost of living index or the 12-month average rate of inflation. It had an effect on at least 31 items.
Despite protests from manufacturers and traders, the Kenya Revenue Authority (KRA) increased excise duty by 4.94% in October last year, in line with the average inflation rate for the prior year ended June 2020.
In a country where less than half of eligible taxpayers are compliant the taxman uses the annual inflation adjustment tax. This leaves those in the tax net to bear the majority of the burden and affects excisable products, which includes motorcycles (boda boda).
Pre-Covid period, bars and entertainment joints were the main places beers and cigarettes – the main drivers of excise duty receipts – were consumed.
The KRA released the new excise duty rates just days after public health authorities permitted bars and entertainment establishments to reopen with reduced operating hours after a six-month closure to combat the spread of Coronavirus infections, which will begin in April 2020.