NAIROBI, Kenya, Apr 6 – The Kenya Association of Manufacturers (KAM) has said that increased excise stamp fees shall have a detrimental effect on manufacturers due to increased cost of production and the cost of finished products.
The manufacturers noted that this will lead to an increased cost of goods for consumers amidst the rising cost of living.
Kenya’s inflation rate hit 9.2 per cent in March attributed to an increase in the cost of food, electricity, and housing, Kenya National Bureau of Statistics data shows.
Further, KAM Board Chairman Rajan Shah said the new Excise Good Management System (EGMS) stamp fee increase will now be like a revenue collection mechanism as opposed to an assurance tool.
He added that the increment to some of the most counterfeited items in Kenya will further encourage the counterfeit and illicit trade.
“EGMS excise stamp is a revenue assurance tool that was initiated to deter counterfeiting, ensure traceability of excisable goods along the supply chain, and enable accounting to produce excisable goods manufactured,” he said.
“As such the new EGMS stamp fee increase is a revenue collection mechanism as opposed to an assurance tool. Additionally, we are concerned that this increment to some of the most counterfeited items in Kenya will further encourage the counterfeit and illicit trade.”
Shah added that the increase will deny government revenue and put the lives of Kenyans at risk as substandard and highly dangerous goods will infiltrate the market
The Association urged the government to enhance tax predictability to spur investments and growth.
Shah said the tax predictability earns investor confidence in the country, leading to increased local and foreign investments.
“Sudden changes in fiscal policy and regulations divert industry’s resource allocation from productivity into meeting the costs associated with changes towards fast compliance,” he said.
He also stated that it should be paramount to make cost comparisons with other countries, regionally and globally, to ensure the country remains competitive.
Rajan Shah’s statement comes after the gazettement and implementation of the Excise Duty (Excise Goods Management System) (Amendment) regulations 2023 that increased the rates of excise stamp fees for bottled water, juices and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products and export products.
The fee for cigars, tobacco substitutes, electronic cigarettes, and other tobacco products was set at Sh5 per stamp as well as that of liquid nicotine, products containing nicotine, wines, and alcoholic beverages made from fermented fruits.
This is an increase from the Sh2.80 stamp fee that cigarette products were being charged.
Treasury has also set the fee for compounded alcohol spirits with a strength of more than six per cent at Sh3 per stamp from Sh2.80.
Beer will be charged Sh3, bottled water Sh0.5, fruit juices, cosmetics, and beauty product Sh2.2.
This is a significant increase from the Sh0.6 per stamp that cosmetics and beauty products have been attracting.
The increment comes barely five months after a 6.3 per cent inflation adjustment on specific excise tax rates was affected on 1 October 2022, impacting cosmetics, confectionery, alcoholic and non-alcoholic beverages including bottled water, and tobacco and nicotine products, among other products.
Three months before the inflation adjustment, there was an increase in excise taxes from 1 July 2022, by between 10 and 20 per cent through the Finance Act, 2022.
