Retailers have reviewed the prices of alcoholic drinks, cosmetics, non-alcoholic beverages, tobacco and nicotine products, all which fall under the excisable goods bracket, even as manufacturers await official communication and or gazettement of the new rates.
This comes with the increase in the costs of excise stamps as Kenya Revenue Authority (KRA) implements Treasury’s strategy to increase revenues from sin tax.
The Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 came into effect on March 1, raising stamp fees by up to 300 per cent.
The cost of stamps affixed on beer bottles has doubled from Sh1.50 to Sh3, while those for spirits, wines and tobacco products have gone up to Sh5, from Sh2.80 per stamp with manufacturers and importers passing on the costs to consumers.
Stamp fee for fruit juices and non-alcoholic beverages such as sodas have increased to Sh2.20, from 60 cents while those for cosmetics have gone up from 60 cents per stamp, to Sh2.50, a 316 per cent increase.
Beside the cost of the stamp, manufacturers, majority of whom are SMEs, will also be required to procure the EGMS machines or be forced to hire people to affix the stamps on the product leading to extra costs.
This cost, according to Kenya Association of Manufacturers (KAM) cosmetics and hygiene sub-sector chairperson, Gasheri Mugao ends up being borne by the consumer.
There has been increasing tax obligations in the manufacturing of cosmetics, starting with the implementation of 10 per cent excise tax in 2017, which was further increased to 15 per cent in July 2022.
This was followed with the changes from ETR system to the TIMS system, which affected the entire excisable good industry.
Retailers are taking advantage of the numerous changes to impose own prices on goods.
"I have had to increase the prices of liquor products and beer by between Sh5 and up to Sh20 to make business sense otherwise I will not even make rent. The cost of operating is increasing everyday,” Esther Musili, a wines and spirits operator in Umoja Estate told the Star.
Yesterday, KAM was held up in a day-long meeting with its members on the way forward following the new stamp prices.
"I will get back to you, in a meeting on the same,” KAM chief executive Anthony Mwangi told the Star.
Manufacturers have warned that an increase will lead to low sales and in turn impact on KRA revenue streams such as VAT, PAYE and income tax, among others.
"The ripple effects will be a downside from job creation to job losses and affect many livelihoods,"KAM says, "It will have detrimental effects."
The Consumers Federation of Kenya (Cofek) said the implementation of the tripled excise tax, through the controversial Excisable Goods Management System (EGMS), is a huge blow to the quest of reducing the high cost of living.
"Since the prices will go up beyond the reach of majority consumers, many will opt to go for slightly cheaper but either counterfeit or substandard goods,” Cofek secretary-general Stephen Mutoro said.
The rising commodity prices is now a catalyst for a higher cost of living as inflation remains above the Central Bank of Kenya’s preferred ceiling of 7.5 per cent.
It increased to 9.2 per cent in February from nine per cent in January, Kenya National Bureau of Statistics (KNBS) data indicates.
"The rise was largely due to increase in prices of commodities under food and nonalcoholic beverages (13.3%); housing, water, electricity, gas and other fuels (7.6%); and transport (12.9%) between February 2022 and February 2023,"KNBS director general Macdonald Obudho notes.
