Cabinet Secretary Ukur Yatani’s hidden ‘sin tax’ measure is likely to hit importers of boda boda motorcycles and secondhand cars in a move aimed at raising an additional Sh50.4 billion.
In his Budget Speech on Thursday, Yatani noted that he had tabled in the National Assembly the Finance Bill 2022, a proposed law that outlines how the government will raise revenues in a given financial year.
The Bill, the CS said, contained a new tax measure where excise duty, popularly known as the sin tax, for various items would be increased by 10 per cent.
This is likely to impact the prices of some items including imported motor bikes and second hand cars.
“Mr Speaker, in the Bill, I have also proposed to increase the specific rates of excise duty for a number of products by 10 per cent to generate additional revenue for the Government,” said Yatani, even as he excluded petroleum products from this increase, citing the recent global increase in oil prices.
Currently, a unit of motor cycle—widely used by those in boda-boda business—attracts an excise duty of Sh10,000. Should this duty be increased by 10 per cent, then a motor cycle will attract a new duty of Sh11,000.
This might be a double blow for boda boda operators who might also be expected to pay third party insurance should the changes proposed by Yatani be passed into law.
In the Finance Bill 2021, now the Finance Act 2021, Yatani had proposed to increase taxes on bread and imported boda bodas.
However, MPs, not only reversed these proposals, but also zero-rated value added tax (VAT) on bread, maize flour, wheat flour and cassava flour in what was hailed as a pro-Wanjiku move.
Although Yatani, in his budget speech on Thursday, said he had tabled the Finance Bill, 2022 our team in the National Assembly had not found this vital document by the time of going to press.
Other products that are likely to be affected by the tax increment include excisable goods like mineral water, cosmetic and beauty products, alcoholic drinks, fruit juices, cigarettes and food supplements
Nikhil Hira, a tax expert, noted that he did not know which products were targeted by the new tax hike.
However, he suspects the government might raid those products with harmful health effects that have traditionally been victims of the sin tax. These include beers and cigarettes.
He, however, does not think the government might have hit such products as airtime and financial transactions with the additional sin tax.
Tobacco products were some of the unlucky items in Yatani’s measures aimed at helping the Kenya Revenue Authority (KRA) collect Sh2.14 trillion in taxes.
Liquid nicotine- also known as vapour- which is popular among young people will be hit an excise duty of Sh70 per milliliter from the current Sh1 per unit.
“These products continue to negatively affect the health of our citizens. The design of these products and their taxation regime makes them easily accessible to users including to school children and the youth, thus leading to nicotine addiction and consequently smoking and use of other drugs.”
Gambling and gaming, whose excise duty might also be targeted by the 10 per cent increase, were also on the receiving end.
Mr Yatani introduced excise duty on all forms of advertisements for gambling, gaming and alcohol industry, areas that in the last 10 years have been President Kenyatta’s tax cash cows.
Also on the losing end will be companies with tax disputes against the Kenya Revenue Authority (KRA). They will now be expected to deposit half of the disputed amount in a suspense account at Central Bank of Kenya (CBK) until their cases are resolved.
But still, the highlight of this budget is not what is contained in the budget speech, but what the public is yet to get, including the budget estimates that various government ministries and spending will be spending.
“In the past, we used to get the Finance Bill as soon as the speech was ready,” said Nikhil, adding that the document needs to be made public because Parliament has little time left before it goes on recess ahead of the elections.
Announcing far-reaching tax measures at a time when they currently grappling with a high cost of living might lead to political fallout that President Uhuru Kenyatta’s administration would like to avoid.
Mr Nikhil noted that manufacturers, who have decried the heavy excise duty on products such as juice, sweets, soda and mineral, must be a scared lot by now.
The Sh3.3 trillion Budget that Yatani did not deviate significantly from the others in the last 10 years, with a lot of money going into legacy infrastructure projects, the Big Four Agenda, security and education.