The Association of Edible Oil Manufacturers in the country has warned that the price of cooking oil will escalate the cost of living with the imposition of 25 percent excise duty as proposed in the Finance Bill 2024.
The Bill currently before the National Assembly, critical in financing Kenya’s Sh3.9 trillion budget for the 2024/25 financial year, proposes 25 percent excise duty both on crude and refined vegetable oils.
In a document to parliament, Edible Oil Manufacturers warns that if the Bill is passed in its current form, it will “unleash widespread economic and social harm across the sectors of the country” that depend on refined and crude vegetable oils.
“If implemented as proposed, this excise duty will trigger an unprecedented surge in the price of cooking oil, a staple in Kenyan households,” the edible oil association says in the document.
This even as the association urged MPs to shoot down the “draconian” proposal ahead of the scheduled public hearings on the Bill next week.
“In light of these grave implications, we urgently call upon the government to scrap the proposed 25 percent excise duty on vegetable oils from the Bill. This tax is not just an economic miscalculation but a potential humanitarian crisis that Kenya cannot afford,” the association says.
The association notes that cooking oil is not an isolated product but a fundamental ingredient of food items consumed by all Kenyans such as bread, Mandazis, Chapatis and Chips among others, meaning that the tax will cause a cascading effect.
The Finance Bill proposes imposition of excise duty on locally manufactured articles of plastics, seeks introduction of eco-levy on all articles of plastic packaging materials and Import Declaration Fee (IDF).
The articles of plastic proposed for taxation are key materials used in the packaging and storage of cooking oil, in what would further escalate the cost of the commodity.
“The cost of this essential commodity is projected to skyrocket by over 90 percent, rendering it unaffordable for millions of Kenyans, particularly the low-income earners and small scale traders, commonly known as hustlers and mama Mbogas,” says the association.
Clause 42 (P) of the Finance Bill 2024, seeks to amend the first schedule to the Excise Duty Act to impose 25 percent tax on both crude and refined vegetable oils of tariff codes 1511, 1512, 1515 and 1517.
Part G of clause 42 of the Bill proposes an imposition of 10 percent excise duty on locally manufactured articles of plastic of tariff heading 3923.30.00 and 3923.90.90.
This as it also seeks an introduction of eco-levy on plastic at the rate of Sh150 per kilogramme on all articles of plastic packaging materials of chapter 39.
According to the association, to manufacture one jerrican of 20 litre oil, one requires one kilogramme of plastic material.
Further the Bill seeks to amend section 7 of the Miscellaneous Fees and Levies Act to increase IDF from 2.5 percent to 3 percent, in what will significantly affect the cost of cooking oil.
The Bill also proposes to repeal section 14 of the Excise Duty Act on relief for raw materials but still does not propose to offset the excise levied on raw materials against excise on finished products.
The implication of the proposed excise duty adjustments on raw and refined vegetable oils will see the price of a 400 gram loaf of bread increase by Sh10 compared to the current Sh70.
The ripple effects extend beyond the kitchen, affecting other essential products derived from vegetable oils with the price of long bar soap likely to escalate from Sh200 to ShSh350 and 250 grams of margarine to hit Sh300 from Sh160.
“Such price hikes will disproportionately affect the most vulnerable members of society, exacerbating the already high cost of living and plunging millions into deeper financial distress,” says the edible oil manufacturers.
The association further warns that the 25 percent excise duty proposal threatens to dismantle the government’s own agenda of promoting local value addition in agribusiness and could stifle the growth of local edible oil production.
This is notwithstanding that the edible oils sector is a significant contributor to Kenya’s economy, directly employing approximately 10,000 individuals and indirectly supporting over 30,000 jobs.
“The proposed tax risks decimating these livelihoods and destabilizing the manufacturing industry at large with devastating effects on the economy.”
