Why inflation adjustment should not be implemented
Kenya Association of Manufacturers (KAM) identifies with the current government’s manifesto: The Plan – The Bottom-up Economic Transformation Agenda 2022 – 2027. The Plan recognizes and appreciates the challenges Kenyans face daily, particularly the high cost of living.
The Plan demonstrates the government’s deep understanding and commitment to developing sustainable solutions for all. KAM remains committed to working closely with Government to transform the economy.
The Plan has singled out regressive taxation, bureaucracy , and regulatory compliance costs as the biggest impediment to getting Kenya out of the “economic hole” we are currently in. The starting point for the economic transformation journey is the commitment to reviewing and rationalising all business licenses to cap total licensing costs at 1.5 per cent of turnover fees.
As rightly articulated in the Plan, enacting an administrative burden law analogous to the United States of America’s Reduction of Paperwork Act will ensure that no business spends more than four person-hours a month on tax and regulatory compliance.
Over the years, the Ease and Cost of doing business in Kenya continue to be significant roadblocks to economic prosperity. More specifically, the hash tax regime is a “zero-sum game” that has shifted manufacturing to our East African Community (EAC) neighbours who are now exporting to Kenya. Unfortunately, as they implement the Government’s economic plan, Kenyans are now facing a new regressive taxation challenge – the proposed inflation adjustments on specific excise tax rates.
The Kenya Revenue Authority (KRA) informed manufacturers, importers of excisable goods and members of the public that they shall adjust excise duty rates of the following products: petroleum products; motorcycles; alcoholic and non-alcoholic beverages, including bottled water; cosmetics; SIM cards (which were just listed as excisable less than three months ago); confectionary; tobacco and nicotine products; and raw hide and skins. The taxes on these products will go up by 6.3%, the average inflation rate for the financial year 2021/2022, as determined by the Kenya National Bureau of Statistics (KNBS). The new rates shall be effective from 1st October 2022.
The Finance Act 2022 increased excise tax rates by 10% and 20%, effective 1st July 2022. A further increase of 6.3% within three months will result in a massive 16.3% to 26.3% cumulative tax increase in one year. Such an increase will significantly impact on mwananchi, who is already overburdened by the ever-increasing cost of living. The cost of raw materials and intermediary inputs has increased by 15% – 20% due to global commodity price hikes.
Furthermore, import costs have increased due to the weakening Kenyan shilling. Fuel prices have also reached a historic high, with a large portion constituting taxes and levies, resulting in a high distribution cost and further increasing the price at which a consumer buys the locally manufactured product.
The inflation adjustment shall also stifle small and medium enterprises (SMEs), who are the backbone of job creation and our economy at large – SMEs are one of the government’s key focus areas. The proposed adjustment shall stifle their growth due to reduced cash flow as they will be forced to absorb inflation adjustment to remain in business.
Implementing the tax increase goes against the Government’s intention to reduce the cost of living, support agriculture through agro-industry value chains, support the growth of SMEs and create jobs for Kenyans, especially the youth. The inflation adjustment is being considered despite several court cases in court challenging KRA’s enforcement of the previous inflation adjustment made under Legal Notice 217 of 2021. The notice sought to adjust the inflation rate of excise duty on excisable goods by 4.97%.
We appeal to the government to halt the implementation of the inflation adjustment as it is not sustainable. Since 2018, the cumulative increase in annual inflation has risen to 26.56%. Therefore, SMEs, among other manufacturers, may not be able to survive if the yearly inflation adjustment rate continues to increase every year.
The government must develop policies with long-term economic goals as opposed to short-term goals aimed at raising revenue without considering the impact of such policies on citizens and the economy.
The writer is the Chief Executive of the Kenya Association of Manufacturers
Shows
See AllAM Live
AM Live is NTV's morning current affairs show that sets the agenda for the day with insightful panels every weekday.
Business Redefined
Business Redefined is Kenya’s premier thought leadership platform for unpacking matters regarding economic and finance policy as well demystifying complex developments in the region’s capital markets.
Comedies
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Documentaries
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Entertainment
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Full Episodes
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Gumzo La Sato
Gumzo La Sato is a live social issues show that aims to create awareness about issues affecting the larger society. The discussions range from Parenting, Marital bliss and struggles, Oppression, violence, and all matters of the Heart.
Health Diary
Health Diary is a weekly show that highlights different types of diseases/conditions and seeks ways to prevent, treat/manage them. The show debunks this through real life stories and also feature specialists in different fields, to offer medical advice on the same.
Letter To My Younger Self
Letter To My Younger Self is a podcast where guests get to write a letter to their younger self, from which Maxine formulates questions to ask them during the hour-long show.
Nation Reports
Nation Reports is a weekly podcast offers an opportunity for listeners to interact with various reporters and journey with them as they unravel the biggest most emotive stories.
One Health Lens Podcast
Discussing health matters and human stories from Kenya and across Africa. We talk big picture from people to policy, ecosystems, and everything in between. Follow us on LinkedIn: https://www.linkedin.com/company/onehealthlens
Paradise Lost
Paradise Lost peeks through the story of Louis Otieno, the times, and everything in between.
Primetime
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Speaking of GEN Z
Speaking of Gen Z brings you entertaining but meaningful conversations about a generation that is trying to navigate through adulthood. Join hosts Michelle, Jackie and Esther as they unravel all things Gen Z.
Sport On
Sport-On is a 30-minute sports magazine show on NTV and 3 hours on NATION FM. The show seeks to give the sports “fanatics” and “funatics” comprehensive and in-depth coverage of sports both locally and internationally.
Tech-over
The extent of technological growth is beyond mere acknowledgment; it has seamlessly integrated into our daily existence. A few years ago, the notion of paying electricity bills through mobile money or recharging with 'tokens' in Kenya seemed inconceivable. Online product sales were considered distant, and artificial intelligence is rapidly reshaping various facets of our lives. Amidst these technological leaps, those with a solid understanding of tech can navigate challenges, seize opportunities, and build a sustainable livelihood. Tech over Show aims to be the platform facilitating discussions among thought leaders, innovators, tech companies, and the government, addressing challenges and opportunities in Kenya's thriving tech industry.
Thamani
Thamani is a business show which is dedicated to emerging issues regarding micro, small and medium size businesses.
The Politalk podcast
This is The Politalk podcast. Here we look into the ins and outs of everything Kenyan politics. We pull no punches and have no reason to sugarcoat anything that matters to Kenyans.
The Trend
A two-hour-long live show that airs on Fridays. The show focuses on what is current in the entertainment industry, controversial and popular across all media platforms targeting those aged between 25 and 35 years.
The trend podcast
The trend podcast highlights and captures the best of banter from #TTTT segment that airs every Friday on NTV. It's the TTTT EXTRA
The Wicked Edition
The Wicked Edition with Dr. King’ori seeks to address serious issues through humour and relatable wit. It is a two-part half hour show filmed in front of a live audience
Trending
A collection of our premium content. Diam curabitur vehicula A collection of our premium content. Diam curabitur vehicula
Twende
Twende is a travel show that highlights beautiful, unique, diverse locations, people, and cultures. The show offers fresh perspectives on familiar locations and memorable experiences in new ones.
Unscripted
This Saturday evening lifestyle show lets viewers share their stories and life experiences as openly & honestly for the purpose of shifting the culture of silence.
VIP Access
VIP ACCESS is Anyiko Owoko’s YouTube and podcast show on Music and Culture dedicated to promoting Africa’s most promising talent and creatives. This podcast grants you VIP access into timeless interviews while providing a platform for rising as well as established artists across the continent. Since launching in 2018, Anyiko has interviewed over 70 African music stars.
WADR
This weekly news show aims to have all sides of debate but not be constrained by it, listen to main voices in the contest but not allow them to hold the viewers hostage, entertain debate but allow push back with all due respect.
When death do us part
In this podcast, three widowers openly speak about the process of grief, how they found themselves exposed to the emotional turmoil of losing their wives, and how society still does not know how to deal with them.
Your World
Your World is a health, wellness and variety show. It provides a platform for audiences and experts to share their experiences on how to improve or manage health issues, across Kenya and the Africa region.