Kenya Taxman Sets Stage for New Water Tax

The Kenya Revenue Authority (KRA) is preparing to raid drinking water and other beverages from September in an effort to raise an additional Ksh3.6 billion ($30 million) from excise tax following introduction of additional excise stamps.

The roll-out of Excisable Goods Management System (EGMS) will see manufacturers from September 1 required to affix the new generation excise stamps on bottled water, juices, soda, energy drinks, non-alcoholic beverages, food supplements and cosmetics.

The move comes as the taxman, who has perennially missed tax targets, moves to seal revenue leaks against the backdrop of ever higher collection targets set by the Treasury.

Past attempts by the KRA to roll out the system have failed after its implementation was opposed in court.

On Tuesday, KRA said it is engaging manufacturers for a smooth roll-out of the system.

"KRA notifies the public of the go live of the excisable management system on bottled water, juices, soda and other non-alcoholic beverages and cosmetics effective September 1, 2019 as stipulated by Section 28 of the Excise Act, 2015 and the Legal notice 53 of the March 2017," said KRA commissioner for domestic taxes Elizabeth Odundo Meyo in a notice.

"KRA will carry out sector based and general public participation fora on EGMS. The fora will target licensed manufacturers, importers, distributors and retailers of bottled water, juices, soda and other non-alcoholic beverages and cosmetics," she added.

Increased prices

Although the cost of compliance is expected to be borne by the manufacturers, they may opt to pass it to the consumer, further raising prices of these products. However, manufacturers remained tight-lipped about the implications of the programme on prices.

"The association will be engaging its members on the implementation of the new generation excise stamps, as part of our public participation process with KRA on the matter," said Kenya Association of Manufacturers (KAM).

The KRA under the newly appointed Commissioner-General James Mburu is expected by the Treasury to collect Ksh1.87 trillion ($18 billion) in taxes in the current financial year, up from the Ksh1.65 trillion ($16 billion) it was expected to raise in the just ended financial year.

Treasury CS Henry Rotich is seeking to raise Ksh242.2 billion ($2 billion) in excise taxes in the 2019/2020 year compared to a target of Ksh210.1 billion previously.

KRA had said extending use of excise stamps to the non-alcoholic sector was mainly informed by the need to address concerns on unregulated products and enhancing tax revenue.

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