New tax on beer, water, fuel delayed to next year

East African Breweries Limited (EABL) plant in Ruaraka, Nairobi. FILE PHOTO | NMG Price increases for a wide range of goods, including fuel, bottled water, juice and beer, have been delayed by six months, offering reprieve to consumers already hurt by job cuts and unpaid leave in the wake of the Covid-19 pandemic.

This follows amendments to the Finance Act, which moved the imposition of a new tax on at least 31 goods from July 1 to January 1 next year.

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.

The delay in increasing the tax will benefit households and traders reeling from the impact of the coronavirus, which has reduced shoppers’ purchasing power due to job cuts and low business activity.

“Annual inflation adjustment is effective from January, 2021,” says the Kenya Revenue Authority (KRA).

The taxman was from this week expected to increase excise duty chargeable on the goods by about 5.5 percent, triggering higher retail prices.

Other items that are set to attract higher taxation are cigarettes, cigars, fruit juices and motorcycles.

Now, the 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.

This is a departure from the previous law that only required the KRA Commissioner-General to issue a legal notice stating the adjustment for it to become effective.

Super petrol is expected to increase by Sh1.16 at the pump as dealers’ inflation adjusted excise duty rises to Sh22.07 a litre from the current Sh20.91. Kerosene and diesel prices are set to increase by Sh0.60 a litre.Fuel prices have a big effect on inflation because Kenya’s economy depends heavily on diesel and petrol for transport, power generation and agriculture, while kerosene is used by many households for cooking and lighting.Last year, the taxman adjusted excise duty by 5.17 percent on inflation, from 5.2 percent in 2018, and the Treasury expects the levy at about 5.3 percent.The average inflation for the 12 months to June stood at 5.51 percent. This will see the excise duty on beer increase Sh6.10 a litre, with […]

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