State to collect Sh40 billion revenue from new taxes

Treasury CS Henry Rotich when he appeared before the National Assembly Finance Committee on audit queries at County Hall, Nairobi. [Boniface Okendo/Standard]

New excise tax measures will see the Government collect additional Sh40 billion in the current financial year, the Treasury’s 2018-19 revenue estimates have shown.

Treasury has projected that it will rake in Sh218.9 billion in excise taxes in the financial year ending June 2019, an uptick of 22 per cent from the Sh179.4 billion it expected to collect in the 2017-18 period.

Significantly, the Sh40 billion is more than what Treasury expected to get from all taxes, including value-added, custom, income and excise duty.

“The tax proposals that I am submitting through the 2018 Finance Bill are designed to generate an additional Sh27.5 billion in tax revenue for the 2018/19 financial year,” said National Treasury Cabinet Secretary Henry Rotich in his June Budget Speech.

The fact that some of the tax channels have experienced substantial growth is sufficient for the Government to be bullish about receiving higher revenue.

Kenya Revenue Authority has also put in place stringent measures to ensure all tax leakages are sealed.

One of the measures that will shore up excise taxes is adjustment of specific rates against inflation, which is expected to result to increased revenue due to a rise in the prices of products and services.

The adjustments by the KRA commissioner general affected a number of excisable items, including cigarettes, alcohol and juices.

Advisory

“The excise duty rates were adjusted upwards by five per cent on average, with water and non-alcoholic beverages attracting the least adjustment at four per cent, fruit juices at five per cent and alcoholic products, tobacco and motor cycles the highest at 5.2 per cent,” said audit firm PwC in an advisory to its clients.

The new rates became effective on August 1, with consumers expected to feel the weight of increased cost of the goods.

It would be interesting to know why KRA increased the rates when data from Kenya National Bureau of Statistics indicates a general decrease in the inflation rate this year compared to 2017.