Customers buying juices at a supermarket.[ photo / Business Daily. ]
The prices of the beer, fruit juice, bottled water, cigarettes, and cosmetics is set to raise in the new year following the implementation of the new excise act that will allow the Kenya Revenue Authority to increase prices of commodities after every two years in relation to country's inflation rate.
The new law, which also gives the Treasury an authority to effect inflation-based tax, will see prices of commodities increased in line with the inflation rate for the 12 months that ended on June 30, 2017.
The tax man has for the past few years failed to meet its target in revenue collection and thus has forced the government to implement multi-billion shilling infrastructure projects to reduce the widening budget deficit.
For instance, the published budget estimate for the 2017/2018 fiscal year shows that government will be planning to spend Sh 2.62 trillion in the current budget with the excise taxes being expected to jump to Sh 199.8 billion.
The rate tax chargeable for the above products is expected to be published by the KRA for the twelve months to June based on the formula in the Excise Act.
The new law had previously been rejected by the Kenyan manufacturers association who went to court asking the treasury to allow inflation adjustment of excise taxes every three years.
The case was however not successful as the tax man was allowed to continue with its two year price review of commodities.