The tax on bottled water and beverages in Kenya is set to increase after the taxman, Kenya Revenue Authority (KRA) announced its plan to implement the controversial Excisable Goods Management System (EGMS) from September 1.
The EGMS seeks to combat illicit trade by facilitating the tracking of stamps and excisable goods along the supply chain and enabling accounting for the production of excisable goods manufactured or imported in the country.
While KRA seeks to raise more than US$ 36 million from manufacturers of bottled water and non-alcoholic drinks, the manufacturers are warning that the new system would have a negative impact on the industry by raising operational costs.
“Whilst the EGMS seeks to combat illicit trade and authenticate excisable goods, the implementation of the System will have a negative impact on industry by raising operating costs and capital expenditures thereby significantly increasing the cost of doing business, which ends up raising the cost of living for Kenyans,” read part of the statement released by The Kenya Association of Manufactures (KAM).
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KAM states that the costs attached to EGMS are high for all manufacturers and untenable for small industries, and have a negative impact on the competitiveness of industry.
“Further, manufacturers do not have any control on possible increment on the excise stamp duty in future, as experienced by some sectors such as tobacco manufacturers, whose duty was increased from Ksh. 1.5 to Ksh. 2.8 per unit. This creates an unpredictable business environment that is a major disincentive for investments,” said the KAM Chairman Sachen Gudka.
KRA states that almost all the automated water and juice manufacturers have installed the new system and is calling on manufacturers and members of the public to give feedback on the new system.
“KRA has concluded installation of the EGMS in 42 out of the 46 automated water and juice production lines. Alternative arrangements have been provided for manufacturers with manual production lines,” said KRA in a statement.