Tax rises to drive most Kenyans to illicit goods: Survey

Kenyans are likely to end up buying illicit goods if proposed new consumer taxes become law, a shock new survey reveals today.

Almost two in every three respondents believe that the excise hikes are Government’s attempt to compensate for the Sh153 billion annual fiscal hole created by illicit trade, while four in five say the rises will affect how they vote in the forthcoming national elections.

This is the public’s damning verdict on the Finance Bill 2022 currently before Parliament, according to a nationwide poll of consumers conducted by lobby group Stop Crime Kenya (StoCK).

StoCK chairman Stephen Mutoro says: “Our latest survey highlights once more the worrying disconnect between policymakers and the grim reality of life for ordinary consumers, who are struggling to cope with the soaring cost of living.

“Tax increases threaten to drive increasing numbers of these honest, hard-working Kenyans to the illegal sector in search of more affordable goods. In so doing, citizens are put at risk from substandard and unregulated products, while criminals get rich and the Treasury is deprived of much-needed revenue.”

Experts will discuss the results of the survey in a StoCK webinar on Tuesday 24 November, with scheduled speakers including Hon. Aden Duale MP, Dr Benedicto Ongeri, Economics Dept. of University of Nairobi, and Kwame Owino, CEO of the Institute of Economic Affairs.

The Finance Bill proposes tax hikes on a range of everyday commodities including fruit juice, bottled water, ice cream, chocolates, cosmetics and beauty products, beer, wine and cigarettes. These increases are in addition to a pending inflation adjustment, which has been held up by a legal challenge since November.

“This double price hike for Kenyans when they can least afford it threatens to backfire spectacularly, as our survey shows,” says Mr Mutoro. “When consumers are driven to the illicit market, legitimate manufacturers and supply businesses are put under further pressure, leading to closures and job losses that perpetuate this vicious cycle.”

The full StoCK survey is available here. Key points include:

• Over half of respondents (55%) say the tax hikes will drive them to buy illicit goods, with another 20.8% saying they’re already buying tax-evading products

• Two in three (60.8%) respondents believe consumers are being made to compensate for the Government’s failure to stop criminals in illicit trade stealing Sh419 million tax revenue every day

• The vast majority (80%) said the proposed tax hikes will affect how they vote in the forthcoming national elections