Tax, Charges & Licenses
Excisable Goods Management System (EGMS)
This is a system introduced by the Kenya Revenue Authority (KRA) to safeguard excise tax revenue through application of excise stamps which has security features. The tax is currently applicable to beer, spirits, tobacco and wine. Implementation is currently ongoing to apply the same to soft drinks and mineral water. KAM is involved in discussions with KRA to ensure that implementation is done with minimal disruption to business operations and no additional costs. Currently the excise stamp costs Ksh. 1.50. This will greatly increase the cost of production for manufacturers and for consumers as well. Other operational issues that KAM is discussing with KRA include installation of the software, product classification and tax point among others. The policy issues include the harmonisation of the excise stamp with the KEBS one as they serve similar purposes, implementation cost and harmonisation in EAC among others.
Excise Duty on Plastics
The Finance Bill 2016 introduced an amendment to the Excise Duty Act, 2015 by introducing excise duty on plastic sacks and bags of tariffs 3923.21.00 and 3923.29.00. Previously, excise duty on plastic bags was limited to shopping bags as KES 120 per kilo. The widening of the coverage has negatively affected the industry as the implementation of the same is applicable almost immediately and was done without stakeholder consultations being done.
Excise Duty on Kerosene
The Finance Bill 2016 introduced an amendment to the Excise Duty Act 2015 by introducing excise duty on Illuminating Kerosene (2710.19.22). This has negatively affected the paints and resins producers as this is their key raw material.
KAM has been advocating for amendments to the VAT Act 2013 in relation to the tax rates for various products. Some key raw materials for industry attract the standard VAT rate at 16%, yet the finished products are exempt from VAT. This has created a big problem for producers of these goods as they are not able to claim the input tax on the raw materials. KAM proposes to have these raw materials zero-rated instead, to allow for claims on the input tax.
Income TaxThe Income Tax Act, 1995 is about to undergo review this year. In view of this KAM members are required to send in their proposals on what should be incorporated or changed.
Taxation Advocacy at EAC Level
Under the auspices of the East African Business Council (EABC), the discussions on domestic tax harmonization have been revived after stalling for a period of about two years. KAM is represented in the working group formed under EABC. The discussions will cover areas on excise tax, VAT, double taxation model, personal income and corporate income tax, tax procedures, tax incentives and information exchange.