Increase in prices of bottled water, juices and other non-alcoholic beverages will take effect as from 11th November 2019.
Consumers of these products will likely pay 1.50 shillings more as the excise duty stamp takes effect next month.
Contrary to expectations, the amount will not go to the Kenya Revenue Authority (KRA) but to a stamp technology provider (SICPA) based in Switzerland.
SICPA was awarded by KRA the management of Excisable Goods Management System (EGMS) tender worth 7 billion, which the stamp provider is expected to directly recover from the manufacturers of bottled water and other beverages.
KRA has ordered manufacturers to ensure that their products have excise duty stamps starting November 13th.
The duty stamps are made to have products tracked by incorporation into the production chain by manufacturers and authenticate features verifiable by consumers.
EGMS was designed to enable the taxman to raise additional revenue from the excise tax but at the time of the EGMS implementation announcement, KRA was not clear about the amount it will collect through the tax.
KRA’s announcement on implementation of the excise tax on water and non-alcoholic beverages was rebuked by activist Okiya Omtatah, who had earlier opposed the excise tax successfully at the High Court before it was overturned by Court of Appeal.
According to the activist, the government is enriching a foreign entity at the expense of poor Kenyans by having them pay more for these products.
The Public Investment parliamentary committee in its report indicated that they were against the implementation of EGMS as they found the tender to be not only overpriced but the burden is thrown fully to the manufacturers.
“The tender is overpriced and left to the manufacturers to pay. This will definitely cause bottled water prices to increase as the manufacturers are bound to pass the costs to consumers,” said the PIC April report.
Kenya Association of Manufacturers (KAM) said that the move will impact negatively on the industry’s competitiveness and that in case of an increment on excise tax in the future, manufacturers will have no control.
According to the Water Bottlers Association of Kenya (WBAK), KRA’s move is not only a financial burden to manufacturers and consumers, but also denies consumers access to clean healthy water.
“As at now, the 20-liter bottle of water retails at between 250 and 350 shillings. The price will rise significantly to about 450-550 shillings, which may cause consumers to go for unhealthy water,” said WBAK.