Here is how Kenya’s new Excise Tax Law will Affect you and me!

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The Current Jubilee Administration has made a number of reforms on Value Added Tax (VAT) and now the excise duty laws. All these efforts have been done within the last two and half years. 
The process was initiated with the aim of modernizing taxation but it ended up increasing the tax burden on the working class.
When the government amended the excise tax laws, the general populace went to the streets protesting. 

In most cases, the excise tax is levied on goods which the government wants to discourage consumption. The demand for these goods is inelastic. That means the demand does not change significantly with change in prices. 

Which goods will be affected by new laws? 

Alcoholic drinks are affected because they are included in the first schedule of the Act. This appear alongside fruit juices and tobacco (the obvious suspect). 
Now, the government considers bottled water and food supplements as luxury goods which have to be taxed. Bottled water will be taxed Kshs 10 for each litre produced by water bottling plants around the country. Why does the government think that the demand for water is inelastic? 

Will the excise tax collected from bottled water be used for progressive realization of the right to water? Will it lead to improved access to water? This remains to be seen. 

There is a clear lack of ring-fencing of the revenue collected from bottled water. 

Plastic Bags 

The Excise Duty Act imposes Kshs 120 per kilogram of plastic bags. The government is using this as a way to deal with the problem of degradation. This tax is expected to lead to a reduction in the use of plastic bags because the tax burden will lie on the shoulders of retailers and wholesalers as well. We anticipate that the government will use the revenue generated to help in disposal of plastic waste. 

Tax on alcoholic beverages 

According to a study done by Institute of Economic Affairs (IEA-Kenya) the best way to levy taxes on alcoholic drinks is on volume of alcohol in the product as opposed to classification (wine, spirits or wines). 

Tax on Used Motor Vehicles 

This tax is unfair on low and middle income earners. This is the case because the rich buy new motor vehicles while the low income earners go for used motor vehicles. This is a clear indicator that the government is mainly concerned with raising revenues and not solving the outstanding problems. 

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Geoffrey Kerosi is a prolific Kenyan writer based in Nairobi City. Email: Skype: gkerosi Whatsapp: +254713 639 776 YouTube: Kerosi TV

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