Manufacturers want the proposed powers to exempt excisable goods like fuel, beer and bottled water from annual price raises due to inflation to be taken away from Kenya Revenue Authority to the lawmakers, citing conflict of interest.
The Kenya Association of Manufacturers (KAM) in a memorandum to the National Assembly argues the Public Finance Act gives Treasury secretary Ukur Yatani the power to waive taxes with no legal provision to transfer them to KRA Commissioner-General Githii Mburu.
The amendments to Excise Duty Act, through the Finance Bill 2022, empowers Mr Mburu to exclude some products from annual inflation tax adjustment based on prevailing economic conditions.
“We propose that the power to exempt specific products from inflation adjustment be granted to the National Assembly instead [of KRA Commissioner-General],” KAM’s outgoing chief executive Phyllis Wakiaga wrote in the memorandum on the Finance Bill before the august House.
“There is a conflict of interest where the institution entrusted as the collector of national government revenue…is the same institution granted the powers of the CS National Treasury to waive or vary tax, fees or charges.”
Mr Yatani on April 7 asked lawmakers to change the law to allow Mr Mburu to spare some of the essential goods from the annual tax raise in October — based on average inflation for the previous financial year — during hard economic times.
“It has been observed that the adjustment may not always be appropriate for some products, depending on economic and social environment facing these products at that time,” the Treasury boss wrote in Budget Statement to the lawmakers.
The inflation adjustment, which came to force in 2018, is a means of protecting the government’s spending power from being eroded by the rising cost of goods and services.
The proposed changes to the law came on the back of rallying calls from consumers and manufacturers for a change in the legal regime to consider unique economic circumstances before raising the duties which eventually reflects in final prices.
For example, the KRA was last November forced to exclude petroleum products from a 4.97 percent tax increment after two consumers — Mr Isaiah Odando and Mr Wilson Yata — obtained stay orders on the enforcement on grounds of hard economic conditions.
“There is no mechanism for the receipt of input from manufacturers or consumers on which products should be exempt in a specific year,” Ms Wakiaga adds.
The lobby has, however, maintained the better method to cushion consumers from higher prices is adjusting the duty after two years instead of every year.
“This is because a two-year adjustment period will create a more predictable business and consumer-friendly tax environment. This would enable businesses to plan for the long term and prevent annual upward price adjustments affecting consumers,” KAM argues.
A similar proposal by giant beer manufacturer East Africa Breweries was shot down by lawmakers last year.
Cereal farmers have been forced to dig deep into their pockets after major global fertilizer producers announced the suspension of export of an important component for production to improve yield dashing gains made in reforming the sector that forms the country’s economy.
The majority of the farmers have been forced to plant without fertilizer as prices hit a record high of ShSh6,200 up from Sh3,000 per a 50 Kilogram bag amid tight supplies by largest producers like China which has announced the suspension of fertilizer exports to ensure domestic availability of the nutrients.
“The fertilizer prices will remain volatile due to global market forces of supply and demand which might force some farmers to plant without the nutrients,” said Henry Ogola, an expert in the importation of farm inputs.