Prices of bottled water are set to increase by up to Sh10 as bottlers and manufacturers move to factor in tax-related costs.
The government has imposed a 10 per cent excise tax on articles of plastics which affects bottles.
Water is also taxed excise duty of Sh6.03 per litre up from Sh5.70, which is among a raft of tax measures introduced under the Finance Act 2021 that manufacturers say are not subject to public participation.
Others are a 10 per cent excise tax on super absorbent polymer (SAP) used in the manufacture of baby diapers, the16 per cent VAT on the supply of liquefied petroleum gas (LPG) including propane, 16 per cent VAT on clean and improved cookstoves, and Sh200 per kilogramme of excise tax on locally produced white chocolate.
According to the Water Bottlers Association of Kenya (WBAK), the excise tax on articles of plastic, which include labels, seals and wrapping material, has already increased the price of bottles by a margin of 12 per cent.
“The consumer should expect a final increase on bottled water price at between 15-18 per cent,” WBAK chairperson Henry Kabogo said in a statement yesterday.
He said the tariff sounds like environmental tax and leaves the industry with no other good choice but to opt-out of the earlier initiative on 'extended producer responsibility, where the industry was planning to pool resources to assist government meets its obligation to offer a clean and safe environment.
“We are hoping this will translate to a vote in the environmental sustainability,” he said, adding that making water expensive through numerous taxes is against the fundamental right to clean and safe water and the United Nation'sSustainable Development Goal number six– clean water and sanitation for all.
It is estimated that about 17 million Kenyans or 43 per cent of the country's population do not have access to clean water.
Bottled water businesses in Nairobi are also facing a further blow as the county seeks to amend the law for a complete ban on the manufacture, import, export, use or offer for sale of plastic carrier bags and plastic material.
This puts over 1,100 companies packaging water on the line with over 50 companies manufacturing plastic containers facing closure.
The Kenya Association of Manufacturers (KAM) has faulted the government for the continued introduction of policies that increase the cost of doing business for local industries.
According to the KAM Manufacturing barometer for quarter 2, 2021, at least 64 per cent of surveyed manufacturers foresee a price increase of their manufactured goods, attributed to among others, imposition of taxes that will drive up the price of finished goods.
“The sector is faced with unpredictable fiscal and regulatory policies focused on raising revenue in the short term, undermining all efforts towards sustainable economic growth,” KAM chief executive Phyllis Wakiaga said.
She said this not only discourages industry to scale up but also leads to investors seeking more suitable, predictable and secure markets to relocate their businesses.
Manufacturers are expected to pass down the extra cost of production to consumers, whose spending power has been crippled by the ongoing pandemic.
The cost of living in the country has been on an upward trend with month-on-month overall inflation recorded at 6.44 per cent in July, up from 6.32 per cent in July, 5.87 per cent in May and 5.76 per cent in April–Kenya National Bureau of Statistics.
Cooking gas prices have increased by up to 31.8 per cent under the 16 per cent VAT regime.
In July, food and non-alcoholic beverages prices increased by 8.84 per cent, while housing, water, electricity, gas and other fuels rose by 6.03 per cent, KNBS noted in the July data.
The cost of transport had the biggest rise of 10.33 per cent between July 2020 and July 2021.