Irony of low tax revenues amid increased alcohol consumption
SEE ALSO :Tatu City shackled by KRA tax probeKRA says in its recent notice that manufacturers and importers of excisable goods other than motor vehicle importers must be licensed or registered with the Commissioner. “Any person who contravenes the above section of the law shall be liable to prosecution and the subject goods shall be seized and destroyed at the offender’s cost,” KRA says. The taxman is, however, optimistic about indications of recovery with January 2018 figures showing a reversal of trend with recorded growths of 6.8 per cent and 1.8 per cent for alcohol and tobacco respectively. The drop in excise tax was one of the challenges that slowed down the taxman from meeting its tax targets at a time the government expenditure appetite is growing faster than its revenues. Overall revenue for the first half of the 2017/18 financial year grew by Sh62.5 billion to Sh712.2 billion from Sh649.7 billion recorded in the previous year.
SEE ALSO :Healthy liver, disease-free lifeKRA said the exchequer revenue grew faster after it posted a 10 per cent growth to reach Sh664.77 billion up from Sh604.27 billion. The other area where the taxman has been losing taxes is through smuggled ethanol imports. Some unlicensed alcohol manufactures, who are funding the demand for illicit ethanol, have in recent months upped their game to beat authorities. Local ethanol manufacturers export the product to Tanzania motivated by lower tax regimes. Ethanol is taxed at Sh60 per liter in Tanzania, a fraction of the Sh200 they would pay in Kenya. KRA does not tax ethanol meant for export market at the same rate as local products to ensure local companies are competitive in the regional market. TRUCKS IMPOUNDED Such incidents are becoming more rampant in the recent months, with some trucks impounded going unreported due to corruption or collusion between customs officials, KRA staff, and the Kenya Bureau of Standards (KEBS). But even among the licensed players, taxation remains a thorn in the flesh. Keroche Breweries is currently in court over taxation of its biggest brand, Vienna. The taxman is demanding up to Sh1.3 billion in unpaid taxes attributed to incorrect tax filing as a result of using the wrong tariff. The brewer obtained a court injunction prohibiting KRA from collecting the money it is demanding. “As would be anticipated, the weakest growth was recorded in the manufacturing sector, while the energy sector performed poorly, a fact mainly attributed to high investment deductions,” KRA said in a statement. KRA attributes some of its tax collection challenges to a depressed economic climate occasioned by the prolonged election cycle that stretched for the better part of the calendar year 2017. “The prolongation according to knowledgeable business sources adversely affected business confidence and depressed consumer spending, leading to a weak performance in consumption related taxes especially in the non-essential goods sectors including beverages,” the taxman says. It adds that the delayed normalisation of the Government’s fiscal programme adversely impacted both public and private sector tax remittances, the latter due to the delayed settlement of bills.