BAT calls for the rational taxation of tobacco

Cigarette maker British American Tobacco (BAT) Kenya is urging the government to review its taxation policy for the country’s tobacco sector saying this holds back the government led war against counterfeit and smuggled tobacco.

The government has over-time compounded the heavily regulated market with even more taxation a matter stakeholders say has contributed to the rise of counterfeit and smuggled tobacco in the country.

The industry was over the last year slapped with the Exercise Act of March 2017 which saw an 87 percent increase in tax stamps in the industry resulting in the unprecedented price hikes for tobacco products.

The increased prices have been directly linked to the surge in counterfeits as consumers who would have otherwise afforded legitimate tobacco have been forced to settle for cheaper alternatives.

BAT Kenya Managing Director, Beverly Spencer said the current taxation model for the industry curtails growth and decreases government earnings from the tobacco sector.

“The (taxation) measures are disproportionate and unjustifiable as they have had no clear benefit to the tobacco industry and to the detriment of consumers, who are increasingly turning to the illegal market. The government is also losing substantial tax revenues as a result,” Ms Spencer said.

Revenue streams for tobacco corporations have also been affected with BAT for instance seeing an addition of Sh160 million to the cost of doing business in Kenya.

Ms Spencer has urged government to provide more stability and predictability in the exercise environment that will also seal loopholes in illicit cigarette trade.

“We welcome increased efforts by various government agencies to tackle illicit trade in Kenya. We note though that more will be required, especially regarding products which appear to have been created domestically,” she said.

BAT is currently pursuing for the abolition of the sin taxation model, a system which has similarly been faulted for impacting negatively on the tobacco trade in Kenya.