Inflation
Revellers are set to start paying higher prices for beer, wine, spirits, water as well as cigarettes starting October 1st when the taxman moves to adjust excise duty in sync with 6.3 percent inflation for the FY2021/22.

As consumers barely come to terms with the impact of the fuel hikes implemented by the energy regulator this week, the taxman has unleashed another shocker on Kenyans, announcing a 6.3 percent inflation-adjusted tax on a range of goods that will raise prices, further eroding the purchasing power of consumers.

With the fresh levies set to kick in starting October 1, Kenyans will have to bear a wave of new, higher retail prices of food and beverages, ratcheting up financial hardship for millions of people still smarting from the pandemic hit.

In a statement, the taxman revealed that the average inflation rate for the current financial year—which the Kenya National Bureau of Statistics puts at 6.3 percent—will be the basis for tweaking the specific rates on alcohol and non-alcoholic products, SIM cards, boda bodas among others.

“The specific rates will be adjusted using the average inflation rate for the financial year 2021/2022 of six decimal three per centum (6.3 percent), as determined by the Kenya National Bureau of Statistics,” the Kenya Revenue Authority (KRA) said.

Read also: Kenya pump prices jump to historic high as Ruto scales back on fuel subsidy

Once effected, the taxman shall be demanding Kes7.02 for a litre of bottled water up from Kes6.6 while a dozen litres of juice will see KRA collect Kes14.40 compared to Kes13.30 currently.

Beers, spirits, wines as well as cigarette prices will also edge up to cover up the revenue the exchequer is hemorrhaging to inflation. The excise duty for a litre of beer (two bottles) is set to jump from Kes134 to Kes142.4 while charges on filtered cigarettes will leave smokers paying Kes4.06 from the current Kes3.82.

The rate of increase in the cost of living has the effect of leaving government revenue shedding value therefore commodity prices have to be revised over time to reflect the shifting prices.

The latest move by the taxman will bolster its ability to achieve revenue targets for the fiscal year ending June 2023, especially now that the Treasury is having difficulties borrowing from both domestic and international capital markets.

For example, this month’s bond sale of 10 and 15-year papers raised Kes39 billion failing to hit the Kes50 billion projected by the Central Bank of Kenya.

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