Effects of the New Excise Duty Rates On The Economy

Kenyans should get ready for tough times ahead in terms of digging deeper into their pockets to pay significantly higher prices for everything from beer, cigarettes, used cars, juices to the naturally available water as soon as the new excise rates passed by parliament come into effect. Even worse for the consumer is that the bill comes with a provision for a built-in annual increase in tax rates that will keep immense pressure on the consumer.

Kenyans will now have to pay at least 300,000 shillings on second hand cars when the excise duty will become fully operational.

According to the bill, the excise duty levy on all imported second hand vehicles that are more than three years old is 200,000 shillings from the current rate of 20 percent of the car’s price.

When the excise duty becomes fully operational, a Toyota Vitz for instance which is eight years old and been attracting a duty levy of 152,000 shillings will now attract a duty levy of 300,000 shillings including the 16 percent Value Added Tax (VAT) plus the import duty.

Beer manufacturers as well as cigarette makers will now have to pay what is known as the “Sin Tax”.

Beer producers will now be taxed a total of one hundred shillings (Ksh. 100) for every liter of beer they produce.

Cigarette makers will now have to pay two thousand five hundred shillings (Ksh. 2,500) for every one thousand (1000) sticks they will be producing.

Lovers of both fruit as well as vegetable juices will have to brace for higher payments once the new excise duty takes effect because producers will now have to pay a tax of ten shillings (Ksh. 10) per every liter.

Those thinking to venture into the motorcycling business (bodaboda business) must be ready to pay an extra ten thousand shillings (Ksh. 10,000) per unit.

The government, through the imposition of these new excise duty levies hopes to raise an additional twenty five billion shillings (Ksh. 25 billions) from the items as one of the factor to ensure that the 2.1 trillion budget is funded.

What are some of the effects that will accompany these new rates? The first fact is all these rates are transferred all the way to the consumer on the ground. The consumer in the streets is the one who will carry the cross of ensuring that he or she pays as stipulated hence prophesying hard economic times for most people who depend on the commodities affected.

The high rates imposed on beer for instance will affect the value chain and the agricultural sector will actually be affected because companies will now be making less bear, demand for beer will reduce and employees will eventually lose employment and the saddest reality is that foreign companies looking to invest in the beer industry will keep off Kenya.

Bodaboda transport will be expensive as the operators will have to hike their fares as a way of raising whatever they would have spent and the reality at the moment is that dealers in second hand cars are now canceling orders and one wonders where the government will collect the said duty from.