Manufacturers challenge 433 per cent industrial sugar tax increase in court

You will have to shoulder the new cost of your beer, flavoured milk, and yoghurt, or dig deeper into your pocket to provide your child with the joy of a lollipop or sweet or, when they get sick from a cold, the cost of cough syrups and vaccines.

 A court case filed by the Kenya Association of Manufacturers (KAM) against Treasury Cabinet Secretary John Mbadi and the National Assembly, Kenya Revenue Authority (KRA) Commissioner General and Attorney General may make your beer sour and your candies something to ponder, as it seeks to challenge the increase in the industrial sugar importation tax by a whopping 433 per cent from the previous financial year.

The manufacturers’ umbrella said that of the 11 sugar factories milling sugar, none of them produces the crucial component.

KMA’s lawyer Noel Ngoloma stated that the Kenya Kwanza administration had, through the Finance Act 2026, increased the excise duty from Sh 7.50 per kilo to Sh 40.

He further said that the government started at Sh 5 per kilo and added Sh 2 in the last financial year. However, this year, said Ngoloma, the manufacturers were shocked, as the new duty is allegedly being implemented immediately.

“This is an increase of 433 per cent imposed overnight upon a manufacturing input which Kenya does not produce at commercial scale — with the consequence that taxes, levies and port charges now consume approximately 90 per cent of the CIF value of every consignment, so that the cost of bringing the raw material to the factory gate now approaches the price of the raw material itself. No manufacturing enterprise in any economy can absorb such a shock,” argued Ngoloma.

 He argued that this cost will be passed to consumers and will make Kenya’s cost of production shoot beyond the East African Community’s market. According to him, if for example a bottle of beer will be increased owing to the cost of production, then the same will not attract customers as Uganda and Tanzania have not increased their duties on industrial sugar.

He insisted that  Section 36 (a) (Vi) of the Finance Act, 2026, strips Sh 6 billion from manufacturers, adding that some firms which are operating below 30 per cent will have to close shop as the taxation regime is unsustainable.

“The reach of the impugned provision extends far beyond the Applicant’s members. The manufacturing sector contributes approximately 7.1 per cent of Gross Domestic Product, employs 388,564 Kenyans directly, being 11.7 per cent of all formal employment, and contributed Sh 462 billion, or 16.2 per cent of total national tax revenue, in the Financial Year 2025/26.”

“The impugned provision strikes directly at that sector’s capacity to produce, to employ, to export and to pay tax, and thus threatens the very revenue base it was enacted to enlarge,” he added.

The lawyer added that KAM members have to increase the cost of their products by 50 per cent, including food, alcohol and non-alcoholic beverages. At the same time, he said, this will have a 36 per cent ripple effect on the economy owing to inflation.

He insisted that there is no justification for such increase as the government was not protecting the local millers.

He said that KAM’s efforts to engage Treasury had allegedly hit a dead end as the CS and his team allegedly remained silent.

“The protective purpose invoked for the measure cannot be served by it at all, the importation of industrial sugar having no impact whatsoever upon the seventeen local sugar factories, all of which produce table sugar and none of which produces industrial sugar from locally sourced raw sugar, and placing at risk none of the over ten million Kenyans dependent upon the sugar sector. An entire manufacturing industry is thus being dismantled for no discernible gain to anyone,” argued Ngoloma.

KAM’s CEO Tobias Alando said that 14 manufacturing sectors, including food and beverage, will be hardest hit.

He said that although MPs went for the industrial sugar, the tax cost for household sugar, which is manufactured locally, remained the same. Alando added that sugar refineries that import raw sugar into the country enjoy tax rebates, while those using industrial sugar have to bear a 433 per cent tax increase.

He argued that this is unfair.

“Industrial sugar is an input used in manufacturing and is not itself a harmful final product; the impugned levy attaches at the point of importation before the ultimate use of the sugar is known, and arises simply because the sugar has been imported rather than because it has been consumed or incorporated into any particular product,” stated Alando.

He said that MPs ignored their memorandum while passing the new tax law.

KAM wants the court to declare the section of contested law unconstitutional. At the same it wants it scrapped from the Finance Act 2026.