Pain in the kitchen: Proposed tax hike set to increase oil prices

Kenyans should prepare for challenging times ahead as prices of basic commodities are expected to skyrocket should MPs approve the proposal to increase excise duty by 25 per cent in Finance Bill 2024.

According to documents presented by 13 manufacturers of edible oils before a parliamentary committee the cost of palm oil that is imported in the country at $930 per barrel will retail at Sh6,737 for a 20 litre Jerrican from the current Sh4,046 which is an increment of Sh2,691 if the excise duty is increased.

Edible Oil Subsector Chairperson Fathi Hayel Saeed and Bidco Oil Refineries Managing Director Vimal Shah told the National Assembly Trade, Industry and Cooperatives Committee that increase in taxes will see a family of four people struggle to have a full meal a day while others will be forced to eat one meal every two days.

“The cost of 10 kg carton cooking fat will increase by Sh1,098 to retail at Sh3,230 from the current Sh2,132, the 400g bread cost will increase from Sh70 to Sh80, the long bars soaps from Sh180 to Sh270, Chapati from Sh15 to Sh25 and mandazi from Sh20 to Sh30 as they are a byproduct of the edible oils,” said Saeed.

The manufacturers said that citizens were constrained by increased taxes such as housing levy and Social Health Insurance Fund (SHIF) with minimum wage being approximately Sh18,000.

Saeed asked the MPs to reconsider the proposed excise duty on edible oils and margarines as well as removal of the Import Declaration Fee and the Railway Development Levy that are levied on the customs value of goods imported into Kenya for home use on crude oil imports, which will lead to Sh72 saving per 20 litres Jerrican.

He said that the notion that the government had put an excise duty on edible oils so that they can promote local manufacturing is not true as this will kill the local industries because the same taxes will apply to them.

“With this we will now allow more imports into the country, our questions to you members is why are we destroying our very own companies with one stroke of the pen, we are calling on Parliament to intervene to ensure that this is stopped,” he said.

The Edible Oil Subsector Chairperson wants the Nut and Oil crop (NOCD) levy of two percent to be removed as this will have a net saving of Sh50 per 20 litre jerrican while the removal of the East African Community (EAC) duty that makes it impossible for them to import within the region will led to a Sh70 saving per a 20 liter jerrican in the local market as they will be more competitive in the export market.

Shah said it has been impossible for manufacturers to import in the region due to the East Africa Community duty with the costs of doing business in Kenya being higher than in Tanzania and Uganda where they are given incentives to encourage them to put up investments.

“The decision by the government to control plastics is not tenable. The move by the government to do away with plastics as packaging containers will not work as it is more expensive to pack cooking oil in either tins, glasses or dispense it due to hygiene standards,” he said.

The National Treasury in the Finance Bill has proposed to re-introduce excise duty on plastic packaging at 10 per cent and introduce ECO levy to promote responsible waste management by Sh150 per kg.