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New taxes reality check as Finance Bill now lawR

BUSINESS
By Frankline Sunday and Wilfred Ayaga | Nov 8th 2019 | 2 min read
Coca-cola Beverages Africa Managing Director Daryl Wilson (right) flanked by Manufacturing Director Duncan Kimani, during a tour of the company's manufacturing plant in Nairobi. [David Njaaga/Standard]

You will start paying more for bottled water, juice and soda next week as the Kenya Revenue Authority (KRA) starts implementing the controversial Excise Goods Management System.

The move came just hours after President Uhuru Kenyatta assented to the Finance Bill yesterday as the taxman seeks to raise Sh3.6 billion to bridge a widening budget deficit and meet the country’s growing debt repayments.

“KRA will implement the Excise Goods Management System (EGMS) on bottled water, juices, energy drinks, soda and other non-alcoholic beverages as from November 13, 2019,” said KRA in a press statement.

“All the above mentioned products, whether manufactured or imported into Kenya, will be required to be affixed with an Excise Stamp.”

The unpopular tax is just one of a raft of new punitive taxes that are set to kick in after Uhuru signed the Finance Bill, 2019 into law. The other key highlight of the new law is the scrapping of the rate cap that will now give banks a free hand in fixing interest rates on loans.

KRA has over the years tried to introduce the EGMS without success following opposition from various stakeholders. The taxman says the EGMS could raise more than Sh3.6 billion in additional revenues and help fight counterfeits.

Manufacturers have warned the system would have a negative impact on the industry by raising operational costs, thus significantly increasing the cost of doing business in the country.

Parliament, in a report published earlier this year, found the process for awarding the Sh2.2 billion contract for roll-out of the system to Swiss company SICPA was flawed.

While Parliament cleared the implementation of the EGMS, a special audit by the Auditor General found the taxman had flouted procurement rules by varying the content of the expression of interest.

KRA was also indicted for initiating the procurement process before ensuring funds were available, with the authority neglecting to table relevant gazette notices on the same before Parliament.

The EGMS will see security excise stamps with track and trace features affixed to products at manufacturing plants, with KRA saying in September it had completed installation of the EGMS in 42 out of the 46 automated water and juice production lines.

Some of the other new tax measures set to come into effect include an increase on excise duty rates for imported vehicles exceeding 1500cc to 25 per cent, with that of diesel-powered ones above 3,000cc set at 35 per cent.

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