Beauty Tax: KRA Turns to Cosmetics for More Tax Revenues

Prices of cosmetics in Kenya are likely to increase if a new proposal raising excise stamp fees sails through. The National Treasury is looking to raise excise stamp fees charged on cosmetics and beauty products from Ksh0.6 per stamp to Ksh2.5 per stamp.

Every package of excisable goods, except motor vehicles, manufactured in or imported into Kenya, is required to be affixed with an excise stamp. Kenya’s beauty and personal care market is worth over Ksh100 billion. According to consumer market insights by Statista, revenue is projected to grow to over Ksh200 billion in 2023. The market is further projected to grow, on average, by 7.65% annually between 2023 and 2027.

KRA is eyeing a larger piece of the beauty pie which includes make-up and hair products as it aims to meet its lofty revenue collection targets. President William Ruto in October last year tasked the taxman with increasing its revenue collection by a trillion shillings to Ksh3 trillion in the next financial year.

KRA posted record-high annual revenue collection of Ksh2.031 trillion for the 2021/2022 financial year. As per its multi-year corporate plan released in 2021, it targeted to collect Ksh6.8 trillion over the 2021/22, 2022/23 and 2023/24 financial years.

Ruto, however, challenged the KRA to find ways of significantly improving revenue collection, a key plank of his plan to ease the public debt burden – stating that the authority should double its tax collection figures within the next five years.

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“We should be able to collect enough money. Our Growth Domestic Product (GDP) has risen Ksh12 trillion yet KRA only raised about 14 percent of GDP in revenues last year. In the past KRA was able to raise 18 percent of GDP. If we collect the same target today, then we would have raised an extra 4 hundred billion shillings. In that case I expect KRA to collect 3 trillion in the next financial year,” the President stated during an event to mark annual taxpayers month last year.

The proposed beauty tax increase represents one of several proposed tax raises on excisable goods. Others include an increase in excise stamp fees for cigarettes and fruit juices from Ksh2.8 to Ksh5 and from Ksh0.6 to Ksh2.2 respectively. The public has up to February 3rd, 2023 to submit their views on the proposal.

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