Tax rises to drive most Kenyans to illicit goods: Survey

The vast majority of Kenyans are likely to end up buying illicit goods if proposed new consumer taxes become law, a new survey has revealed.

According to the survey to be released today (Tuesday), almost two in every three respondents believe that the excise hikes are government’s attempt to compensate for the Kshs 153 billion annual fiscal hole created by illicit trade, while four in five say the rises will affect how they vote in the forthcoming national elections.

This is the public’s damning verdict on the Finance Bill 2022 currently before National Assembly, according to a nationwide poll of consumers conducted by lobby group StopCrime Kenya (StoCK).

StoCK chairman Stephen Mutoro says: “Our latest survey highlights once more the worrying disconnect between policymakers and the grim reality of life for ordinary consumers, who are struggling to cope with the soaring cost of living.

“Tax increases threaten to drive increasing numbers of these honest, hard-working Kenyans to the illegal sector in search of more affordable goods. In so doing, citizens are put at risk from substandard and unregulated products, while criminals get rich and the National Treasury is deprived of much-needed revenue.”

In a webinar Tuesday under the theme Finance Bill 2022, High Taxation on FMCGs and Illicit Trade”, experts will discuss the results of the survey.

Scheduled speakers including MP Aden Duale, Prof Benedicto Ongeri, Economics Department, University of Nairobi, and Kwame Owino, CEO of the Institute of Economic Affairs.

The Finance Bill proposes tax hikes on a range of basic and fast moving consumer goods including the staple maize flour meal, fruit juice, bottled water, ice cream, chocolates, cosmetics and beauty products, beer, wine and cigarettes.

These increases are in addition to a pending inflation adjustment, which has been held up by a legal challenge since November 2021.

“This double price hike for Kenyans when they can least afford it threatens to backfire spectacularly, as our survey shows,” says Mr Mutoro. “When consumers are driven to the illicit market, legitimate manufacturers and supply businesses are put under further pressure, leading to closures and job losses that perpetuate this vicious cycle.”

“What is more? When sin taxes on alcohol and cigarettes and taxes on other FMCGs are increased, such goods are offloaded onto the black market which becomes too expensive for the consumer as revenue to government goes totally missing. The balance is therefore important.

The Finance Bill 2022 must reflect this reality. It is not about Kenya Kwanza or Azimio. It is about our economy and the lives and livelihoods of our people. We must get it right’, added Mr Mutoro.

The full StoCK survey is available here.