NAIROBI, Kenya, Feb 1 – The Kenya Association of Manufacturers (KAM) has opposed the proposed increment of the current market prices on excise stamps saying it will have a negative impact on consumers and manufacturers.
According to Rajan Shah, the Chairman of Kenya Association of Manufacturers (KAM), the increment shall have a detrimental effect as it shall result in an increased cost of production and the cost of finished products which will be passed on to the consumer amidst the rising cost of living.
“The EGMS stamp is a revenue assurance tool that was initiated to deter counterfeiting, ensure traceability of excisable goods along the supply chain, enable accounting to produce excisable goods manufactured or imported and facilitate any persons in the supply chain to authenticate the stamps and excisable goods.”
“As such the proposed drastic increase of cost of stamps seeks to be a revenue collection mechanism as opposed to an assurance tool,” he said.
The chairman further stated that there is a need for joint impact assessments with the industry, competitive supplier bidding, and meaningful consultative engagements, particularly with regard to how the cost of stamps affects the whole cost of production.
He continued by saying that Kenya’s costs are among the highest in this regard, with the cost of the stamp and its administrative requirements being equal to the cost of the good, which keeps Kenya from being competitive as a hub for investment.
“We are afraid that such increment to some of the most counterfeited items in Kenya will further encourage counterfeit and illicit trade,” he added.
“This will deny government revenue and put lives of Kenyans at risk as substandard and highly dangerous goods infiltrate the market.”
Additionally, Shah stated that the increase will cause low sales, which will hurt manufacturers’ other sources of income, such as income tax, VAT, and PAYE, among others.
Also, he added, there will be negative side effects from employment creation to job losses, which will have an impact on many people’s livelihoods.
“The proposed costs will further make Kenyan products uncompetitive at the global market due to the high cost of compliance and unpredictable regulatory environment,” he stated.
“This poses a great risk of suppressing the manufacturing sector’s contribution to the Gross Domestic Product (GDP) that has been shrinking over the last five years.”
The Association called on the government to keep the current excise stamp fees in place and to complete and execute the National Tax Policy with an emphasis on increasing predictability and certainty in the tax system.
The Kenya Revenue Authority’s proposal to increase the cost of excise stamps comes just four months after a 6.3 per cent inflation adjustment to certain excise tax rates went into effect on October 1, 2022, affecting a variety of products including cosmetics, confectionery, alcoholic and non-alcoholic beverages, including bottled water, tobacco, and nicotine products.
The Finance Act of 2022 increased excise taxes starting on July 1, 2022, by between 10 and 20 per cent, three months prior to the inflation adjustment.
KAM said that for investments to be encouraged, tax predictability is crucial.
