KRA announces implementation of the 6 percent inflation adjustment on excise tax

Kenyans are facing tough times ahead after the Kenya Revenue Authority (KRA) announced the implementation of the annual inflation adjustment on excise tax.

The deadline for submission of views on the proposed 6.3% inflation adjustment ends on Friday, September 16, 2022, ahead of its rollout on October 1.

The move will result in an increase in prices on petroleum products, motorcycles, alcoholic and non-alcoholic beverages, cosmetics, SIM cards, motorcycles, rawhide and skins, among others.

KRA Commissioner General James Githii Mburu Pulse Live Kenya

The proposed 6.3% inflation adjustment was mooted to cushion the government as Kenya’s currency continues to lose value as the price of goods increases.

Many manufacturers and traders have taken KRA to court severally to oppose the inflation adjustment tax, arguing that it drives the cost of goods beyond the reach of many households.

They say the hikes result in reduced consumption of products and ultimately reduces the taxes paid.

This comes days after the prices of super, diesel and kerosene hit a record high of Sh179.30, Sh165 and Sh147.94 respectively.

Fuel inflation was the primary cause of overall consumer price increases in Kenya over the past year due to higher pump prices.

Increased prices of basic food items such as maize flour, wheat flour, and cooking oil have eroded the buying power of many Kenyans.

Even at supermarkets, sometimes shoppers are forced to forgo items during checkout because of budget constraints.

KRA employees at work Pulse Live Kenya

Manufacturers worry that their products are losing market share as consumers look for alternatives that are less expensive or give up consumption altogether.

KRA collects highest revenue in history

KRA announced that it collected the highest revenue in Kenya’s history in the 2021/22 financial year.

“The positive revenue growth rate mirrors the improved tax compliance from patriotic taxpayers who contributed to the collection of revenue.

“Revenue collection has tripled from Sh707.36 billion in FY2011/12 to Sh2.031 trillion in FY2021/22,” he said in July.

READ: How KRA's blunder gifted taxpayer Sh500 million

According to KRA Commissioner General James Githii Mburu, this year's annual revenue collection has hit and surpassed the Sh2 trillion mark.

Githii noted that corporation tax performance was driven by increased remittance from key sectors like finance, insurance, manufacturing, wholesale and transport while Pay as You Earn (P.A.Y.E.) tax performance was driven by the gradual recovery of the job market emanating from economic recovery.