The National Treasury has ordered the tax and duty-related provisions of the Finance Bill 2017 into effect even before the Bill passes into Law.
This order from the Treasury became effective last week and will see excise stamp fees paid on cigarettes and alcoholic beverages with more than 10.0 percent alcohol content increase to 2.8 shillings per retail unit from 1.5 shillings previously.
Contrary to this, excise stamp fees on non-alcoholic beverages, mineral water, and cosmetics have practically been halved, reducing to 0.6, 0.5 and 0.6 shillings per retail unit respectively.
Keeping in mind that non-alcoholic beverages are consumed by a larger population and at a higher frequency than alcoholic beverages with above 10.0 percent alcohol content, the net effect of these changes would be a tax cut on beverages in general.
The provisions in the Finance Bill are in line with taxation measures outlined in the National Budget for the fiscal year 2017/18 where it was proposed to increase the tax on wines and spirits with an alcohol content above 10.0 percent to 200 shillings per liter from 175 shillings per liter previously.
This move will likely result in alcoholic beverage manufacturers and retailers passing on the extra costs to the consumer, leading to an increase in prices of these wines and spirits.
According to Cytonn Investments Limited, this move by the Treasury:
- will have minimal effect on inflation as alcoholic beverages, tobacco & narcotics only bear a 2.1 percent weighting on the Consumer Price Index’ (CPI’s)
- will lead to minimal increase in revenue for the exchequer as the bulk of tax collection comes from PAYE and VAT at 43.4 percent and 22.3 percent respectively whose changes were to increase the tax brackets hence lesser collections.