Consumers are now staring at an increase in prices of alcoholic beverages and cigarettes, as the National Treasury seeks to raise more revenue to fund President William Ruto’s Sh3.99 trillion budget.
Beer of alcohol content below six per cent and wine will be levied at Sh22.50 per decilitre (10ml) of pure alcohol, while spirits will be levied Sh16 per decilitre of alcohol content.
This is a shift from the current excise on beer charged at Sh142.44 per litre, wine at Sh243.43 and spirits at Sh356.42.
This translates to an increase in excise on spirits of up to Sh720 per litre and wine to Sh270, if proposals presented yesterday in the 2024-25 budget by Treasury CS Njuguna Ndung’u are adopted by MPs in the Finance Bill next week.
Beer lovers will however have something to smile about as excise on the brands with low alcohol by volume of 4.2 per cent will drop to Sh94.50.
Those with higher content of up to 7.5 per cent, mainly imports, will see excise go up to Sh168.74.
Cigarette prices could also go up as tax on mille (1,000 sticks) of filtered cigarettes goes up to Sh4,100 from Sh4,067.03, translating to an excise increase from Sh4.07 per cigarette to Sh4.10.
Excise duty on liquid nicotine has been increased from Sh70 to Sh100 per millilitre.
The higher sin tax on these products is part of the government's effort to raise the collection from excise taxes by Sh111 billion to Sh401.1 billion, from a projected Sh290.1 billion in the current financial year.
Ndung’u, who presented Ruto’s second budget in Parliament, also went after gamblers as he proposed an increase in excise duty for betting, gaming, prize competition and lotteries from 12.5 per cent to 20 per cent.
Vehicle owners have also not been spared as Treasury maintains it wants 2.5 per cent as annual motor vehicle tax, at the rate of the value of the vehicle subject to a minimum of Sh5,000 per annum, which had been widely protested.
Tax on advertising of alcoholic beverages has also been widened to online platforms and social media.
Ndung'u also wants to charge an eco levy, which is a new environmental tax targeting manufacturers and importers of select products, to set up waste management infrastructure, finance Kenya’s sustainable waste management programme, and set up material recovery facilities and electronics waste collection centres across the 47 counties.
The levy means an increase prices for all plastic packaging materials, batteries, and hygiene products.
For instance, the Sh150 levy per kilogram of plastic packaging will increase the cost of a 400 grams loaf of bread by Sh9 from Sh65 to Sh74; increase a litre of cooking oil by Sh16.81 from Sh300 to Sh316.81; increase one kilogram of power detergent by Sh30 from Sh200 to Sh230, notwithstanding other duties.
Lead acid battery weighing 12kg is set to increase from Sh8,500 to Sh17,500.
Wheelbarrow tires also increase from the current Sh700 to a new high of Sh1,700 while trolley wheels will see a price rise of Sh1,000 under the proposed tax measures.
“The tax measures proposed in the Finance Bill, 2024 and the said custom measures are expected to generate an additional Sh346.7 billion,” Njuguna said.
It is, however, a relief for pensioners as Treasury moves to exempt from taxes all retirement benefits paid from a registered pension fund, registered provident fund, registered individual retirement fund of National Social Security Fund, and the Public Pension Scheme, upon attainment of the retirement age.
Excise duty on telephone and internet data services; fees charged on money transfer services by banks; fees charged on money transfer by agencies and other financial service providers; and fees charged by cellular phone service providers, has been retained at 15 per cent.
Capital gains tax will also go down from 15 per cent to five per cent, for firms certified by the Nairobi International Financial Centre Authority.
This, Ndung'u said, is “to attract international financial investors in Kenya and reinforce Kenya’s position as a regional financial hub.”
Transfer of property between an individual and an entity where the individual holds 100 per cent shareholding will also be excluded from capital gains tax, as this kind of transfer don’t constitute a gain, the CS said.
Withholding tax on payments for management fees, professional fees, training fees, and contractual currently at Sh24,000 has also been removed.
VAT on mosquito repellents and raw materials used in the manufacture of the repellents has been removed, to encourage local production.
Treasury has however introduced a minimum top-up tax payable by a multinational group with a consolidated annual turnover of EUR 750 million whose effective corporate tax rate is below 15 per cent, to create a level playing field with those paying 30 per cent.