New tax to raise beer, fuel, motorbike prices

Fuel prices have a big effect on inflation because Kenya’s economy. FILE PHOTO | NMG The prices of a wide range of goods including fuel, bottled water, juice and beer will increase from July 1 following imposition of new taxes on the products, which will be a blow to consumers already hurt by job cuts and unpaid leave in the wake of the Covid-19 pandemic.

The Kenya Revenue Authority (KRA) will increased excise duty chargeable on at least 31 goods by about 5.5 percent, setting the stage for higher retail prices from next month.

The adjustment is in line with the law that demands 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 tax increase will hit consumers hard as households and traders reel from the impact of the Coronavirus disease, which has reduced shoppers’ purchasing power due to job cuts and movement restrictions, forcing businesses to cut down their activities.

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 11 months to May stood at 5.51 percent. This will see the excise duty on beer increase Sh6.10 a litre with the tax currently at Sh110.62 a litre or Sh55.31 a bottle, giving Kenya one of the highest tax rates on alcohol in Africa.

The excise on spirits is set to go up by about Sh13.40 from Sh253 per litre, while wine will attract an additional Sh10.41 tax from the current Sh189 per litre.

Firms like East African Breweries Limited (EABL) have been raising beer prices by Sh10 per bottle in response to the inflation adjusted tax.

The listed brewer has issued a profit warning for the year ended June on reduced sales following the closure of bars to limit the spread of Covid-19, and had previously warned of tax-induced drop in beer demand.Other items that are […]

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