Breakdown: High Bread Prices, Lower Beer Prices & Other Key Proposals In Finance Bill 2024
The proposed amendments are likely to impact a wide array of products and services, potentially reshaping consumer spending patterns across the country and forcing Kenyans to rethink their budgets.
Marvin Chege 
President William Ruto's administration has proposed sweeping changes to the country’s Value Added Tax (VAT) system, outlined in the Finance Bill 2024.
The proposed amendments are likely to impact a wide array of products and services, potentially reshaping consumer spending patterns across the country and forcing Kenyans to rethink their budgets.
One of the notable revisions targets essential consumer goods, with bread, betting stakes, and credit cards among those slated for price adjustments, with the proposed Bill seeing an introduction of Motor Vehicle Tax.
Viral Tea takes you through key proposals contained in the Finance Bill 2024:
More Cost Of Bread
Among the proposals that will likely enrage Kenyans is the increase in the price of bread, with the Treasury proposing to impose a 16 per cent VAT on the product, a matter which will force bakers to raise the costs of the staple product.
Under the proposed changes, a 400g loaf of bread could see a price hike of at least Ksh10, raising the average cost from approximately Ksh65 to around Ksh75.
Image of a loaf of bread. /BON APPETIT
The exchequer had proposed the removal of ordinary bread from the list of zero-rated supplies, a VAT exemption list. Ordinary bread, along with other consumer items such as maize and wheat flour, milk and sanitary products had until now been considered important warranting their exclusion from the 16 per cent VAT.
In March, Treasury Cabinet Secretary Njuguna Ndung'u hinted at the introduction of VAT on the product as his ministry targeted to boost collections from middle-class households which he viewed as the largest consumers of bread.
Motor Vehicle Tax
In the 2024-2025 tax plan, vehicle owners are to pay annual taxes as the bill notes that, “A tax known as Motor Vehicle Tax shall be payable to the commissioner on each motor vehicle at the time of the issuance of an insurance cover.”
The motor vehicle tax has been pegged at 2.5 per cent of the value of the vehicle and shall not be less than Ksh5,000 and shall not be more than Ksh100,000, with other factors coming into play including the make, model, engine capacity and year of manufacture.
"Notwithstanding any other provision of this Act, a tax known as motor vehicle tax shall be payable to the Commissioner on each motor vehicle at the time of the issuance of an insurance cover," read part of the bill.
"Motor vehicle tax shall be payable based on the value of the motor vehicle, at the rate specified in the Third Schedule."
Parties exempted from paying the motor vehicle tax include hospitals operating an ambulance, national and county governments, the Kenya Defence Forces, the National Police Service, the National Intelligence Service and diplomatic personnel.
An insurer of a motor vehicle shall collect and remit motor vehicle tax within five working days after issuing a motor vehicle insurance cover.
Mixed Fortunes For Kenyan Party Goers
The proposals have not spared Kenyan revellers either. The Finance Bill 2024 also proposes a new method of calculating excise on beer, wine and spirits based on pure alcohol content, also known as alcohol by volume (ABV), unlike the present method which has a flat excise for each of the three types of alcoholic drinks.
Wine lovers will be particularly annoyed to hear that they will pay more with a proposal to charge up to Ksh270 from Ksh243.43 per litre, with wines normally having about 12 per cent ABV.
Spirits will meanwhile see a steep rise in excise as a result of the change to an ABV-based calculation, indicating that the government is looking to cash in on the growing popularity of these drinks. The majority of the spirits sold in the market have an ABV of between 37 per cent and 45 per cent.
A bar in Kenya selling drinks. /FILE
At the lower ABV range, the excise duty per litre will jump to Ksh592 per litre, while for those with an ABV of 45 per cent, the excise will jump to Ksh720 per litre. Furthermore, the spirits commonly sold in 750ml bottles will now attract excise of between Ksh444 and Ksh540 per bottle based on the ABV.
For cigarettes, the Treasury is proposing to increase duty on unfiltered cigarettes, which are commonly used by lower-income smokers, from Ksh2,926.41 per mille (1,000 sticks) or Ksh2.96 per cigarette stick to Ksh4,100 per mille, or Ksh4.10 per cigarette.
On filtered cigarettes, the excise per mille has been raised to Ksh4,100 from Ksh4,067.03 previously, translating to an excise increase from Ksh4.07 per cigarette to Ksh4.10.
Similarly, the government wants to raise the excise on products containing nicotine or nicotine substitutes, such as nicotine pouches, from Ksh1,595 to Ksh2,000 per kilogramme. The excise on liquid nicotine, which is used in e-cigarettes and vape devices, is set to go up from Ksh70 to Ksh100 per millilitre.
However, the fortunes might change for beer lovers who will pay less with the new bill proposing Ksh142.44 per litre down from the current Ksh253 per litre, which might also vary by ABV. Beers with an ABV of 4.2 per cent will have their excise per litre drop to Ksh94.50, effectively dropping the tax on a 500ml bottle in which they are sold to Ksh47.25 from the current Ksh71.22.
Stout beers which have ABVs of between 6.5 per cent and 7.5 per cent are however expected to attract slightly higher excise of Ksh73.13 and Ksh84.37 per 500ml bottle.
High Cost of Airtime & Mobile Money Transfers
Kenyans could also be forced to part with more for making phone calls, paying for mobile data bundles to use the internet and making mobile money transactions.
In the proposed amendment, the National Treasury has proposed a hike in excise duty charged on telephone and internet data services from 15 per cent to 20 per cent, a matter which will force telcos to increase the cost of both of those services.
The bill also proposed an increase in excise duty for money transfers, meaning Kenyans could be forced to pay more to send money.
In addition to the excise changes, the National Treasury is also proposing to introduce VAT on financial services, including forex transactions and cheque processing.
Other Notable Proposals
Betting, gaming and lotteries have also seen a proposed increase of up to 20 per cent from 12.5 per cent, meaning that gamblers will pay the government Ksh20 for every Ksh100 staked, a move the government believes will lower the appeal for betting.
“The first schedule to the excise duty Act is amended by deleting the words twelve-point five per cent and substituting thereof the words twenty per cent,” the National Treasury says in the draft Bill.
Other changes include VAT on mosquito repellents, tea packaging material, foliar feeds and bio-stimulants as well as agricultural pest control products.
The Finance Bill 2024 is expected to be adopted by the Cabinet and tabled in Parliament for debate and approval before the end of June.
