NAIROBI, Kenya
The Kenya National Treasury is proposing the introduction of more taxes as President William Ruto's administration seeks additional revenue to fund his ambitious programmes.
In the Kenya Kwanza
government's Draft Medium-term Debt Strategy for the period 2024-25 and
2026-27, the National Treasury proposes a raft of major tax changes.
Some of the highlights of the
proposed tax reviews will be the harmonization of the country's VAT with the
East African Community member states.
Most of the EAC states have
VAT at 18 per cent while Kenya charges 16 per cent.
At the same time, the National
Treasury is proposing to put alcoholic beverages and cigarettes on the radar
again with excise duty after a short reprieve.
The government did not impose
additional taxes on the products under the Finance Act, 2o23.
Excise rate for filtered
cigarettes, non-filtered cigarettes and other tobacco products will be
harmonised while excise duty on alcohol will be pegged on alcohol content
Kenyans have until October 6,
2023, to submit comments on the proposals from Treasury.
Currently, taxation of
alcoholic products is based on various criteria including, consumer behaviour,
value of the product and the volume of consumption as well as alcohol content.
''In order to streamline the
taxation of alcoholic products, over the strategy period, the government will
review the basis of taxation to the alcoholic content of the product taking
into consideration the harmonisation with EAC region,'' the proposals read in
part.
The National Treasury says in
the draft strategy paper that the government will increase exercise duty on
spirits and higher alcohol content products to discourage their consumption as
they pose higher health risks.
''This will be informed by
quantitative analysis to determine the optimal tax rate that will be applicable
to each alcoholic product,'' reads the draft medium-term debt strategy.
Regarding exercise duty on
cigarettes and other tobacco products, the National Treasury proposes to
harmonise exercise duty rate across filtered cigarettes, non-filtered
cigarettes and other tobacco products.
The National Treasury says it
will take into account international best practices and promote fairness.
''Given the negative health
externalities of these products, the rates will be based on the extent of the
externalities of these products as well as recommendations of the ongoing EAC
partners states study,'' the treasury says.
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