Kenyans have begun feeling the pinch on their wallets as new tax measures passed in the Finance Bill 2021 begin to take effect.
The list of those affected by the new excise duty rates includes manufacturers, importers and consumers of alcoholic beverages; excisable goods; re-introduction of excise duty on locally manufactured sugar confectionery; betting and cost of bank loans.
According to Kenya Tax Alert by Deloitte& Touche, the introduction of 20% excise duty on Excise Duty on bank loans, including other fees.
Kenyans to pay more for confectionary and chocolates
“The amendment implied that loan processing and commitment fees should not be subject to excise duty. The proposed deletion of the words “fees or commissions earned in respect of a loan” is, in our view a step that is towards the wrong direction, as it will lead to ambiguity on the scope of interest that is exempt from excise duty,” said Deloitte.
The Finance Bill provides relief of excise duty on bulk internet data purchased for resale.
The measure proposes to amend Section 14 of the law to allow for the offset of excise duty paid by licensed persons on purchase of bulk internet data against excise duty payable on the resale of the internet data to final consumers.
The proposal to allow for the offset of excise duty paid on bulk data against excise duty payable on the resale of internet data to Kenyans is in line with the treatment mentioned above on excisable goods and, if adopted, will avoid double payment of excise duty on internet data and ultimately reduce the cost of providing internet data services.
The Bill proposes to re-introduce excise duty on locally manufactured sugar confectionery and chocolate.
The measure proposes tariff heading 1704 at KSh 20.99 per Kg and white chocolate, chocolate in blocks, slabs or bars of tariff codes 1806.31.00, 1806.32.00 and 1806.90.00 at KSh 209.88 per Kg.
Those to be affected will be Kenyans who run local manufacturing firms and consumers of confectionery and chocolate.
“Excise duty on confectionery and chocolate was introduced in 2018 to discourage consumption of confectionery and chocolate products, which are associated with adverse health effects. In 2019, the Government removed excise duty on locally manufactured sugar confectionery and chocolate, intending to cushion local manufacturers from cheap imports.
The proposal to re-introduce excise duty on these products seems to be driven by the government’s need to generate additional tax revenue from Kenyans
Deloitte notes that the CS had proposed a similar amendment through the Tax Laws (Amendment) Bill, 2020, but the National Assembly did not approve the proposal.
It remains to be seen whether the National Assembly will adopt the proposal.
The Finance Bill 2021 has re-introduced excise duty on betting, at 20% of the amount wagered or staked. Those affected are bookmakers and stakers.
In 2019, the Government introduced excise duty on betting to curb the adverse social effects caused by betting, particularly amongst the youth. However, the Finance Act 2020 removed excise duty on betting activities following lobbying by betting companies to the National Assembly. The removal of the duty was effective 30 June 2020.
On 2 July 2020, the National Treasury issued a statement indicating that it was never the government’s intention to remove excise duty on betting services and that it would be proposing a reintroduction of the same within six months.
It remains to be seen whether the National Assembly will adopt the reintroduction of excise duty on betting activities.
The Finance Bill has introduced excise duty on jewellery of tariff heading 7113 and imported jewellery of tariff heading 7117 at the rate of 10%. Those affected are importers, local manufacturers and consumers of jewellery.
These include small objects of personal adornment such as rings, bracelets, necklaces, brooches, ear-rings, neck chains, watch-chains etc. and articles of personal use customarily carried in the pocket, in the handbag or on the person, e.g., cigar or cigarette cases, snuff boxes, spectacle cases, powder boxes, lipstick holders.
Jewellery of this heading is wholly or partly precious metal or metal clad with precious metal.
On the other hand, jewellery of tariff heading 7117 only covers small objects of personal adornments, not incorporating precious metal or metal clad with precious metal.
Excise duty has traditionally been imposed on luxurious goods, and jewellery would fall in this category. Whereas there are no adverse effects associated with jewellery, the price elasticity of these products provides an easy avenue for the government to generate revenue.
The Finance Bill proposes to introduce excise duty, at the rate of KSh 5,000 per Kg, on products containing nicotine or nicotine substitutes intended for inhalation without combustion or oral application but excluding medicinal products approved by the CS responsible for health matters and other manufactured tobacco and tobacco substitutes that have been homogenized and reconstituted, tobacco, tobacco extracts and essences.
Importers and local manufacturers of products containing nicotine or nicotine substitutes for Kenyans will be affected.