KRA to lose power of raising fuel, beer taxes

Kenya Revenue Authority offices in Nairobi. FILE PHOTO | NMG The Kenya Revenue Authority (KRA) is likely to lose its power to unilaterally impose a new inflation tax on a wide range of goods including fuel, bottled water, juice and beer from July 1.

This follows amendments to the Finance Bill by the National Assembly’s Finance Committee, which requires the taxman to seek parliamentary approval for the new tax.

Under the current law, the KRA Commissioner-General only needs to issue a legal notice stating the adjustment for it to become effective.

This was the case last year when excise duty on at least 31 goods rose by 5.15 percent and was this year expected to increase by another 5.5 percent, setting the stage for higher retail prices beginning next month.

Now, KRA will be required to seek the approval of the Treasury Cabinet Secretary before making the specific excise rate adjustment, and thereafter the legal notice will be taken to Parliament within seven days of publication for consideration. Parliament will, within 28 sitting days of receiving the notice, decide whether to approve or reject the inflation adjustment.

MPs will next week vote on the recommendations of the House committee before the President signs the new Finance Bill into law.

“The amendment is to provide that the commissioner should seek approval of the Cabinet Secretary before making the inflation adjustment. Further, it is to require that the Gazette notice be laid before the National Assembly,” said the committee in its report.

“The National Assembly should have power to check the powers it has donated to the commissioner to make inflation adjustments, and, may or may not approve the adjustment.”

The adjustment has been in line with the law that demands excise duty to be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June.

The tax increase will hit consumers hard as households and traders reel from the impact of the Coronavirus disease, which has reduced shoppers’ purchasing power on job cuts and movement restrictions, forcing businesses to cut down their activities.

Inflation adjustment tax was introduced in 2018 and is seen as a means of protecting the government’s spending power from erosion by rising cost of living and avoid seeking MPs’ nod for higher retail prices.Super petrol was expected to increase by Sh1.16 at the pump as dealers’ inflation adjusted excise duty rises to Sh22.07 a litre […]

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