EDITORIAL: Excise taxes action timely

Parliament’s decision to stop the automatic annual increase in excise taxes on a wide range of consumer goods is welcome.

The levy on commodities such as bottled water, juice and beer would have been adjusted upwards from the start of this month in line with the rate of inflation. That policy was meant to raise more revenues and make the process automatic with the Kenya Revenue Authority (KRA) simply publishing the rate of adjustment.

But as the Covid-19 pandemic has demonstrated, there is a need for flexibility in policy-making on taxation and other matters. It is clear that the government’s priority right now should be to protect lives and ease the economic pain brought by the coronavirus disruption.

So, it is in order that the excise duty hike has been postponed to next January, giving consumers room to recover from the lockdown effects.

The amendment to the Finance Act provides that the rate of excise duty adjustment will be made after approval by the Cabinet Secretary for the National Treasury.

This offers an opportunity to take into account the prevailing economic situation.

In an economy with relatively high rates of inflation, setting a tax to rise with the cost of living is unsustainable as the two would feed on each other.