President Uhuru Kenyatta has reinstated the higher taxes on beer, cigarettes, used cars, juices and water after he rejected the lower duties proposed by MPs in the Excise Duty Bill, 2015.
The President’s proposed higher taxes are contained in a memo to MPs following his rejection of the Bill passed in Parliament, arguing that the lawmakers’ move would make it difficult to raise additional Sh25 billion from the items.
This means importers of used car and motorcycle as well as cigarettes and fruit juice manufacturers have lost their bid to lower the higher taxes introduced by Treasury secretary Henry Rotich in June to cater for the current year’s budget.
“The deletion of the item (fruit juices, cigarettes, motor vehicles, motor cycles) will, therefore, adversely affect the revenues to be collected making it inconsistent with the approved fiscal framework and Division of Revenue Act,” Mr Kenyatta said in a memorandum to the National Assembly outlining reasons for refusing to assent to the Bill.
It will take a two-thirds majority (232 MPs) to overturn the President proposals when the House sits again to reconsider Mr Kenyatta’s recommendation and retain the amendments they made to the Rotich Bill.
Treasury slapped a Sh200,000 excise tax on all vehicles more than three years old from the date of first registration and Sh150,000 for newer vehicles.
This adjustment replaces the existing 20 per cent excise tax based on a vehicle’s value, which is charged alongside customs and value added tax.
MPs backed a Bill that lowered the car tax to Sh150,000 for newer vehicles and Sh100,000 for those more than three years old. Both new and second-hand cars are now set to cost more since dealers look set to transfer the new higher tax totals to buyers.
Motorcycles will also attract excise tax at Sh10,000 a unit, hitting the boda boda business hard. MPs had dropped the tax on motorcycles.
Cigarettes, which are currently taxable at the higher rate of Sh1,200 per 1,000 sticks (mille) or 35 per cent of the retail sales price, will see the applicable rate more than double to Sh2,500 per mille based on the President’s and Mr Rotich’s proposal.
The Bill backed by Parliament had a graduated scale based on cigarettes prices. MPs wanted cigarettes retailing at Sh2,750 for 1,000 sticks charged Sh900 and those between Sh2,751 to Sh3,750 levied duty of Sh1,200 per mile.
Cigarettes selling at between Sh3,751 to Sh4,750 be charged Sh1,800 per mille and Sh2,800 for those that cost more than Sh4,750.
Mr Kenyatta said the proposed changes to duty charged on tobacco would make revenue collection complex through the application of multiple rates to similar excisable goods.
On fruit and vegetable juices, President Kenyatta rejected House proposals to remove a Sh10 per litre tax. He asked the MPs to reinstate the tax before he assents to the Bill
MPs stood with Mr Rotich’s proposal for a flat rate tax of Sh100 per litre for beer and higher duty on water.
Beer is currently charged the higher amount of between Sh70 per litre and 50 per cent of the ex-factory price, meaning the taxes go up a minimum of 42 per cent. Water will attract a tax of Sh10 per litre, up from Sh3 per litre.
Mr Rotich urged MPs to prioritise the Excise Duty Bill for debate, saying the measures are key to funding the Sh2.1 trillion 2015/16 budget