Taxing problems in Kenya

British American Tobacco Kenya has said further increases in excise duty could put its products out of consumers’ reach and deal a hard blow to its profitability, according to a story in The Business Daily.
BAT Kenya, which on Friday reported a 21.2 percent drop in net profit to Sh3.3 billion, said unpredictable tax increases were a threat to its Kenya business.
“We would encourage the government to have a much more stable tax environment so that their revenues can be more predictable and we can have a more predictable operating environment,” BAT Kenya MD Beverly Spencer-Obatoyinbo said at a media briefing.
“Smaller increases in specific excise rates are easier for us to manage and easier for the consumer to handle and will give consistent revenue gains for the government.”
Tobacco control advocates claim that cigarette tax is too low, and they have been urging the government to raise it from the current Sh2.50 per piece to Sh3.25 per piece.
“Currently, the average growth in the nominal price of a pack of cigarettes is lower than that of kerosene and food, and therefore cigarette smoking is going up,” said Rodgers Kidiya, program officer in charge of research and development at the Nairobi-based International Institute for Legislative Affairs.
The tax-increase proposal, Kidiya said, was based on a predictive model that took into account inflation to show the future prices of products.
The current tobacco excise tax regime was instituted in 2015, but in March last year Treasury Secretary Henry Rotich provided relief to smokers of low-end cigarettes with a cut in excise tax that saw the price of non-filter cigarettes fall by 70 cents.
Rotich split the tax structure for cigarettes keeping it at Sh2.50 per piece for cigarettes with filters and introducing a new rate of Sh1.80 for those without.
The two types of cigarettes had been attracting a uniform tax of Sh2.50 per piece.