[2008-05-08]  BAT concerned over tax
British American Tobacco (BAT) Kenya is against any possible increase in excise duty, saying such a move would pave way for the sale of illicit products.

At a time when the Government is sourcing for additional funds for stalled projects, the tobacco company says an increase in excise duties would distort the market.

"A significant excise rate increase on cigarettes this year will simply encourage illicit trade and threaten Government’s existing income within our sector," said BAT’s managing director, Mr Nicholas Maistre, at the company AGM in Nairobi, yesterday.

Over the last one year, the tobacco industry has suffered due to increase in excise duty on cigarettes.

In addition, changes were proposed to the structure of excise duty where cigarettes would be taxed according to their physical characteristics instead of their retail price.

Though this restructuring of excise represented a positive move in the fight against illicit trade, BAT fears that any move towards increasing the excise duties would go against the need to not just collect taxes, but also fight the sale of contraband products.

"We encourage the Government to be mindful of the established link between high tax rates on cigarettes and the incidence of illicit trade," said Maistre.

"After the large excise increases last year, we appeal to the Government to show restraint this year," he said.

Maistre also said the hike, under the current budget, wiped out Sh1.2 billion from the firm’s earnings. It wants the Government to take revise the tax structure for tobacco products.
Source: Copyright © 2008 Standard Group