Kenyan-Tax Adjustment to Change Bottled Water Prices

Kenyan-Tax Adjustment to Change Bottled Water Prices
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Kenyan-tax adjustment has featured a proposal by water bottlers that the tax administration should put off inflation adjustment on excise duty to bolster consumers and the industry which has experienced a decline in sales in the past few months.

This is ahead of the October 1 rollout which will enable Kenya Revenue Authority (KRA) to revise upwards excise on certain goods which will inflate prices.

According to Kenya Revenue Authority (KRA), the specific rates will be modified using the average inflation rate for the financial year 2021/2022 of 6.3%, as determined by the Kenya National Bureau of Statistics.

Commissioner General Githii Mburu said that he will adjust the specific rates of taxes applicable to excisable goods, which are charged excise duty at a specific rate per unit under the Excise Duty Act, 2015, and other goods subject to fees or levies at a specific rate under the Miscellaneous Fees and Levies Act, 2016.

This will ensure an increase in the price of products such as beer, wines, cigarettes, non-alcoholic drinks such as juices, chocolate, fuel products, and bottled water, among others.

Kenyan-Tax Adjustment: More on the Proposal

According to the Water Bottlers Association of Kenya (WBAK), the move will increase the prices of bottled water and refilling by between Sh5 and Sh130, depending on product type and volume.

Ex-factory prices for 500ml water will rise from Sh420 to between Sh480 and Sh600, which will also come with excise on bottles. A half liter of bottled water will retail at Sh40 from Sh30 with a liter set to rise from Sh70 to Sh80, and that of 20 liters will increase from the current prices of between Sh570 and Sh650 to Sh700. Refilling a similar container will cost Sh430 up from Sh360.

This means consumers will be forced to purchase these products at a higher price, at a time when city dwellers and parts of the country are struggling to get clean water.

Inflation adjustment on excise duty to bottled water and similarly packaged will rise from Sh6.03 per liter to Sh6.41, which will inevitably lead to WBAK bottlers inflating the price of their products.

In a memorandum to the taxman, WBAK chairman Henry Kabogo stated that such inflation will make bottled water costly and unaffordable to many which will hurt a lot since most Kenyans now depend on bottled water unlike in the past.

The WBAK has also expressed concerns over harassment of water refilling shops in the estates, which are allegedly being coot down by KRA enforcement officers who want them to comply as manufacturers or bottlers.

These shops sell Jerican at between Sh60 and Sh200 for a 20 liter contrary to the Sh600 to Sh650 products available on the shelves.

He further mentioned that the players cannot be subjected to manufacturing terms where at least Sh550,000 is expected for abidance alone.

According to the Kenya National Bureau of Statistics, about 50% of Kenyans rely on underground water mainly supplied from wells and boreholes. The majority of the major residential estates and satellite towns around the city do not have clean water connections and depend on water gotten from private boreholes.

Such estates include Ngong, Ongata Rongai, Kiserian, Kitengela, Athi River, Syokimau, and Ruaka.

Areas that have city water connections like Langata, South C, South B, Dagoreti, Westlands, etc, have precarious supply, therefore necessitating the need for borehole water connection.

Meanwhile, Stop Crime Kenya (StoCK), which has a secretariat at the Consumers Federation of Kenya (Cofek) has cautioned that the looming inflation adjustment will lead to increased illicit trade. This will also impact negatively on struggling consumers, as it will lead to an increase in the price of certain commodities.

According to StoCK chairman Stephen Mutoro, this will worsen the already bad situation for consumers who are already battling the rising cost of living.

The inflation adjustment comes less than two months after price hikes in July, which came with the Finance Act 2022.

He mentioned that these new increases will simply push more shoppers to pursue presumed bargains in the shadow economy, thereby increasing the profits of criminals involved in illicit trade.

Households in the country have been struggling with a rising cost of living since June, with inflation hitting a five-year high of 8.5% last month. This was primarily propelled by the cost of food and non-alcoholic drinks.

Kabogo concluded that while taxation is vital for economic prosperity, over-taxation of a basic commodity like water in a country where access to clean, safe drinking water by homes has not been made possible, makes clean, safe drinking water unaffordable and unreachable to many.

What is WBAK?

Water Bottlers Association of Kenya (WBAK) is the national wide, industry-specific trade association that depicts and promotes the interests of water bottling, refilling, and vending companies with government agencies and key industry stakeholders in Kenya.

It has over 350 members and represents over 60% of the water industry players.

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