Kenya: Mastermind Faults Finance Bill 2011, Calls for Review

Source from:  Nairobi Star 03/28/2012

Mastermind Tobacco has petitioned Treasury over what it calls unfair taxation that places it at a competitive disadvantage in the market. The company is asking for a review of the excise duty regime applicable to its tobacco products which it says discriminate against its lower-market segment consumers. In a letter to the Permanent Secretary, Treasury, Mastermind is opposed to the proposal in the current Finance Bill 2011 to charge a uniform amount of excise duty across all categories of cigarettes saying this would not only hurt sales but will also lead to lost government revenue. "It is clear the recommended unitary tax system does not meet the cardinal principles of taxation as it is eschewed towards increasing taxes for the poor and reducing taxes for the rich," Robert Mutuma, Mastermind company secretary said in the statement. The Finance Bill 2011 is yet to go through parliament following a deadlock over a push by members of parliament to cap interest rates charged by banks. The Bill proposes to charge all categories of cigarettes a rate of Sh1,200 per mille (one thousand sticks) or 35 per cent of the retail price, whichever is higher. Previously, under Finance Act 2010, cigarettes were classified into four categories, A, B, C and D based on their retail sale price and taxed differently. The lower-income categories, A and B, were charged Sh700 and Sh1000 respectively while the premium bands of D and C attracted Sh1500 and Sh2500 respectively per a thousand sticks. Under the proposed Bill this would change to a uniform Sh1200 across all categories. Treasury envisaged netting about Sh1.8billion more in excise duties from cigarettes but Mastermind contends that this has not been the case. "Instead the unitary tax proposal has had the real potential and threat of reducing the current revenues and hence reversing the gains made under the current excise tax regime," the letter notes. Mastermind said the impasse over the Bill should mean automatic recourse to the Finance Bill 2010 which it feels would net the government more revenues and also impose taxes equitably. The tobacco maker charges that certain premium brands in the market would attract lower taxes while its brands which predominantly cater to the lower-income market would see a price hike hurting sales and reducing tax collected. Treasury is set to resume efforts to move the Finance Bill 2011 through parliament when the House resumes sittings next month. Enditem