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KRA announces Inflation adjustment on specific rates of excise duty

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The prices of several commodities are set to go up from October 1, 2021 when the Kenya Revenue Authority (KRA) effects annual inflation tax adjustment on excise duty charged on the products.

The new taxes will affect the prices of at least thirty-one goods including beer, fuel, bottled water and juice.

In a statement, KRA Commissioner-General Githii Mburu said excise duty on the products will increase 4.97 percent in line with average annual inflation.

“Kenya Revenue Authority would therefore like to inform manufacturers and importers of excisable goods falling under the specific rate category and members of the public that the Commissioner-General will adjust the rates of Excise Duty using the average inflation rate for the Financial Year 2020/2021 of four decimal nine seven per centum (4.97%), as determined by the Kenya National Bureau of Statistics. The adjusted rates will be effective from 1st October, 2021.”

Consumers will therefore have to dig deeper into their pockets as manufacturers will pass on the additional cost of the commodities to end users.

The net effect of this will be more economic strain on Kenyans who are grappling with the high cost of living, occasioned by the ever-rising tax burden.

Most households are also feeling the effects of economic fallout caused by the COVID-19 pandemic that wiped livelihoods by eating up jobs, killing businesses and sending the economy into a coma.

The adjustment is in line with the law, which demands that KRA revises excise duty upwards in line with the cost of living measure in the 12 months through June.

The annual inflation rate in Kenya surged to 6.44 percent in July of 2021 from 6.32 percent in June, reaching its highest level since February 2020.

Main upward pressure came from prices of food and non-alcoholic beverages (8.84 percent vs 8.46 percent) and housing and utilities (6.03 percent vs 4.25 percent).

Meantime, inflation slowed for transport (10.33 percent vs 14.71 percent).

On a monthly basis, consumer prices edged up 0.2 percent, following a 0.1 percent uptick in June.

The inflation adjustment which is in line with provisions of the 2015 Excise Duty Act has now been subjected to stakeholder input through public participation ahead of the approval of the adjustment by National Treasury Cabinet Secretary Ukur Yatani.

In 2018, the average inflation rate in Kenya amounted to about 4.69 percent compared to the previous year, a significant decrease from 7.99 percent the year prior.

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