Taxing questions in Kenya

The current system for taxing cigarettes in Kenya should be replaced with a simplified one where all types of cigarettes are taxed equally, according to a story in The Star.
Currently, filtered cigarettes are taxed at Sh1.80 per piece while those without filters are taxed at Sh2.50 per piece.
The International Institute for Legislative Affairs (IILA), which is described as a Nairobi-based legal think tank, said the system had created many loopholes and that the government was ‘losing Sh7 billion every year in potential taxes’.
The IILA has proposed the introduction of a flat rate of Sh3.25 per piece regardless of whether it is filtered or not.
In fact, the Kenya Revenue Authority (KRA) adopted a flat taxation system in 2015, taxing cigarettes at Sh2.50 per piece regardless of type.
“This move led to a drop of 17 percent in consumption of cigarettes and an increase of revenue of appropriately Sh7 billion from Sh8.23 billion to Sh15.56 billion,” Emma Wanyonyi, the IILA chief executive, said in Nairobi yesterday.
But manufacturers had lobbied against the flat rate and the Treasury Cabinet Secretary Henry Rotich ordered the KRA to revert to the tiered system last year.
The IILA submitted its recommendations to the treasury, which received 2018-19 tax proposals from key public and private sector players yesterday.
BAT Kenya said it opposed increased taxes on the grounds that cigarettes would become ‘too expensive for ordinary people’.
“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 managing director Beverly Spencer-Obatoyinbo said.