Sugar taxes among surprises in Njuguna Ndung’u Budget statement

As a result of the government’s plan to impose an excise duty of Sh5 per kilogram of imported sugar at a time when a shortage of the commodity has driven prices to highs of Sh210 per kilogram, sugar consumers can expect to pay more at the store shelf.

Njuguna Ndung’u, the Treasury Cabinet Secretary, stated in his Budget speech on Thursday that the duty, which would be passed on to the final consumer, is intended to reduce sugar consumption for health reasons.

The staple, however, is a constant in almost all households and ranks alongside bread, flour, rice, and milk as one of the most commonly consumed household foods.

Due to a global shortage, sugar prices have increased from $560.46 (Sh78,301) in February to about $675.69 (Sh94,400) per tonne today.

Due to reduced factory output and expensive imports, the Kenyan market is currently experiencing a shortage that has caused the weekly optimal stock to fall by 80%, driving retail prices to an all-time high.

“Consumption of sugar has been associated with various ailments such as diabetes, which has become common in many families,” said Prof Ndung’u.

“To discourage consumption of sugar, I propose to the National Assembly to introduce excise duty on imported sugar at the rate of Sh5 per kilogramme, excluding the sugar imported or purchased locally by registered pharmaceutical manufacturers for use in the manufacture of pharmaceutical products.”

If the National Assembly’s Budget and Finance Committee had not amended the Finance Bill 2023 to make it clear that it would only apply to imported goods, the duty would have also been imposed on domestic sugar.

However, the Cabinet Secretary favoured other household essentials in the Budget by lowering the import duty on items like rice and wheat.

According to Prof. Ndung’u, Kenya would import rice at a rate of 35% rather than the 75% rate set under the EAC Common External Tariff because of insufficient local production of the two crops.

Additionally, wheat imports will now be subject to a 10 percent duty rather than the 35 percent that was originally planned under the EAC Duty Remission Scheme.

The Ministry of Agriculture will recommend that wheat be imported, and before importation is permitted, wheat millers must first make a local wheat purchase, according to the CS.

A number of special duty measures intended to support Kenya’s manufacturing sector were also extended by the EAC finance ministers during their annual pre-budget consultation meetings.

These include allowing Kenya to continue importing materials for baby diaper production duty-free for an additional year and to continue taxing imported diapers at a rate of 35% in order to support domestic producers.

In order to address the high cost of the product that has contributed to high food prices in the nation, Kenya was given a similar window for duty-free imports of raw materials and inputs for the manufacture of footwear products and roofing tiles.