Women, the poor hit as Henry Rotich increases taxes

Treasury Cabinet Secretary Henry Rotich has singled out motorists, women and poor households as the biggest financiers of his budget.

Women are the biggest consumers of cosmetics which will, beginning next month, attract a 10 per cent excise duty.

In his Budget Speech to Parliament Wednesday, Rotich also said the cost of kerosene, typically used for cooking and lighting by the poor, will rise by Sh13 per litre.

Previously, kerosene has been spared from excise duty. However, oil marketers have abused this regulation by mixing kerosene with petrol to widen their profit margins.

A litre of super petrol and diesel will now attract an additional Sh6, cementing motoring as a key source of Government revenue.

"I am proposing to impose a 10 per cent excise duty on cosmetic products," Mr Rotich told members of the National Assembly who did not seem moved by the major pronouncement.

Kenya's cosmetics industry is estimated to be worth Sh6.4 billion, meaning the anticipated collections could be over Sh300 million.

It is the first time, in six years, that the Government is targeting taxes from the cosmetics industry after slashing duty in 2009 in a move interpreted as helping women look beautiful.

Uhuru Kenyatta, then Finance minister, quipped that halving excise duty to 5 per cent was in "recognition that beautiful women are the face of a healthy society".

Motoring fuel prices, including diesel and petrol, will also rise by Sh6 after the rise in the road maintenance levy, the biggest jump ever.

Last year, Mr Rotich raised the road maintenance levy by Sh3, meaning the specific tax has been doubled in just two years.

In 2014, the levy was only Sh9 per litre but it will, beginning July 1, rise to Sh18.

With the estimated consumption of nearly 6 million cubic metres, Mr Rotich could raise as much as Sh36 billion.

And according to Mr Fred Omondi, a partner at Deloitte East Africa, motorists continue to be an easy target for the Government, with sustained tax increases on petroleum and motor vehicle imports.

"Last year saw substantial increment in road development levy and this year the CS has further increased road maintenance levy, which will lead to an increase in fuel prices. Excise duty has been revised from a specific rate to 20 per cent of excisable value, which implies an increase in tax for motor vehicles whose import value exceeds Sh750,000," said Omondi.

He added: "While the current low global petroleum prices may have provided the incentive to load additional taxes on fuel, motorists should expect to bear a heavier load going forward. If the current trend of increments continues, we may well be encouraging Kenyans to become a walking nation."

Following a major public outcry on a taxation measure announced last year allowing uniform taxation on motor vehicles, irrespective of engine size and age - for those over three years - Rotich announced the resumption of the older formula.

Excise duty on cars will now be at 20 per cent of their valuation, and not the flat rate of Sh200,000 that has been applicable since July 1, 2015.

Already, an explosion of fuel guzzlers on Kenyan roads has been observed following the policy unveiled last year, with car dealers reporting that demand for the smaller cars had steadily fallen.

Taxing all vehicles at a uniform flat rate meant that big luxury vehicles actually became cheaper, while the smaller cars that would typically be acquired by the middle-income earners got costlier.

A typical eight-year-old Toyota Vitz, one of the cheapest and popular models, is valued at Sh400,000, after factoring in depreciation.

A flat excise duty of Sh200,000 is nearly three times the Sh80,000 that it would attract under the progressive tax schedule - which Kenya will revert to at the end of the month.