Manufacturers fault proposed hike in excise stamps rates

The Kenya Association of Manufacturers (KAM) has expressed alarm over the proposed Excise Duty (Excise Goods Management System) (Amendment) Regulations, 2023, which aim to increase the rates of excise stamps for various products.

The government is seeking to increase the prices of excise stamps on bottled water, juices, non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products.

The proposed increase, which would come into effect on March 1, 2023, would be up to levels over 100 percent and beyond the current market prices, which KAM believes will have a detrimental effect on both consumers and manufacturers.

KAM Chairman Rajan Shah said, “The proposed drastic increase in the cost of stamps seeks to be a revenue collection mechanism as opposed to an assurance tool.”

He went on to say, “Meaningful consultative engagements, competitive bidding of suppliers and Joint Impact Assessment with the industry need to be conducted to ensure the country remains competitive.”

The Excise Duty stamps are a revenue assurance tool used to deter counterfeiting and ensure the traceability of excisable goods along the supply chain.

The proposed increase would make Kenya’s cost one of the highest in the world, with the price of stamps and administrative requirements equaling the price of the product, making Kenya an uncompetitive investment hub.

Shah added, “We are afraid that such an increment to some of the most counterfeited items in Kenya will further encourage counterfeit and illicit trade. This will deny government revenue and put lives of Kenyans at risk as substandard and highly dangerous goods infiltrate the market.”

The proposed increase would lead to low sales, affecting revenue streams such as VAT, PAYE, and Income Tax, and potentially resulting in job losses.

KAM urged the government to retain the current charges on the excise stamps and to finalize and implement the National Tax Policy, with a focus on enhancing certainty and predictability in the tax code.

Shah said, “Predictability earns investor confidence in the country, leading to increased local and foreign investments. Sudden changes in fiscal policy and regulations divert industry’s resource allocation from productivity into meeting the costs associated with changes towards fast compliance.”

The proposed hike would see stamp fees for cosmetics increase 317% from 60 cents per stamp to KES 2.50, and fees for fruit juices and non-alcoholic beverages increase 267% to KES 2.20 from 60 cents.

The cost of a stamp on a beer bottle would double to KES 3 from KES 1.50, and fees for spirits, wines, and tobacco products would rise 79% to KES 5 from the current KES 2.80 per stamp.

The increase in stamp prices would likely be passed down to consumers by producers and importers, similar to other excise charges, and is expected to bring in extra billions for the Treasury.

This is the first review of stamp prices since 2017, with an estimated 2.9 billion stamps sold annually by the Kenya Revenue Authority.

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