This archive report was first published on 28 September 2019.
Kenyan manufacturers are bracing for a 21% increase in excise duty, following a decision by Parliament to raise the tax on cigarettes, wines, and spirits by 5.15 percentage points.
Originally proposed at 15%, the Finance Bill 2019 is now awaiting presidential assent, with manufacturers warning that the additional costs will be passed on to consumers.
According to a joint statement by cigarette and alcoholic beverage manufacturers, the move will widen the disparity in excise and prices across East Africa, increasing profit margins for illicit traders and the supply of illicit products.
The statement, signed by the Alcoholic Beverages Association of Kenya, Mastermind Tobacco, and British American Tobacco, described the move as 'strange and unusual.'
Kenya hopes the increased sin tax will generate more revenue to help reduce the budget deficit, which stands at 5.7% this financial year.
However, the increase comes amid concerns of a rise in the illicit trade in cigarettes, with BAT data showing a significant increase in the volume of illicit cigarettes entering Kenya from Uganda.
Uganda's excise tax on cigarettes is $14.8 per 1,000 sticks of locally manufactured cigarettes and $20.2 for imported cigarettes, while Tanzania levies $3.4 per mille excise tax on cigarettes with filter containing more than 75% of domestic tobacco.
