POSITION PAPER ON THE IMPLEMENTATION OF THE EXERCISE DUTY ACT, 2015
The Central Organization of Trade Unions, COTU (K) is embedded in the fight for the protection and enhancement of the rights and freedoms of workers as provided in the sovereign constitution of the Republic of Kenya.
Pursuant to this noble task is the need to promote the Decent Work Agenda by ensuring that the welfare of workers in Kenya is optimum. In this regard, reference is made to the public notice on the commencement date for the excise Duty Act, 2015 contained in the Legal Notice No. 245 published in the Kenya Gazette Supplement Number 188 of 27th November, 2015.
COTU (K) wishes therefore to draw the attention of the government on the negative effects of the implementation of the excise tax on economic growth and development as well as on the welfare of workers and the public in general.
IMPLICATION OF THE PROPOSED EXCISE TAX ON THE WELFARE OF WORKERS
- It leads to either a decrease in the quantity produced of a given good or an increase in the cost of production.
- The increase cost of production leads to a loss to the producers who bear the cost of the tax paid to the government.
- The workers as well bear the burden of the tax by paying higher prices for fewer goods and services.
- The overall cost of the excise tax is a reduction in the welfare of the workers measured by the Dead weight loss due to the tax paid to the government.
- It leads to inflationary pressures in the economy worsening the purchasing power workers.
- It increases the cost of living to the workers as it takes away much of their income meant for consumption.
INTERPRETATION OF THE PROPOSED EXCISE TAX ON WORKERS
- The Kenyan workers bear a greater burden of the excise tax in each case.
- The tax leads to inflationary pressures in the economy.
- The cost of production increases, reducing th profitability of producers. This has spillover effects on wages and salaries advanced to workers as producers maximizes their profits.
- The welfare loss that results from the exercise tax should be compensated by the tax revenue collected from the tax.
- Given that the Excise Tax Act provides for a differentiated tax system, for example among brewers and distillers, the losses in welfare is differentiated. This is punitive as it abuses the bill of rights, Article 27 (1&2) on equality and freedom from discrimination.
- It reduces the gains made in the financial and mobile telephone services by increasing the cost of transactions by the workers.
PROPOSAL BY COTU (K)
Pursuant to COTU (K)’s mandate to protect and safeguard the rights of workers and the foregoing analysis, we wish to make the following proposals;
First and foremost, we demand that Article 21 (1&2) of the Constitution of Kenya on equality and freedom from discrimination be adhered to forthwith. In regards to this provision, we call for uniform excise duty charged on beverages to safeguard brewers, distillers and mixers of alcoholic drinks in Kenya from unfair practices.
Secondly, in order to improve transparency, efficiency, accountability and fairness in revenue administration, COTU (K) proposes that uniform excise duty regime is worth being adopted. We stand in solidarity in fairness in the administration of revenue justice for workers.
Thirdly, the corruption bill in Kenya is skyrocketing at higher degrees from millions to billions and is almost surpassing the public wage bill. Therefore, a uniform excise duty regime will close possible loopholes for those who wish to loot from the public systems.
Fourthly, high excise taxes are likely to put off local investors. This signals danger as companies may either close shop or massively retrench causing major job losses in the country amid eminent retrenchment by the government in favour the International Monitory Fund (IMF) directive.
Fifthly, COTU (K) wishes to underscore the need for the government to seek alternative sources of revenue rather than increased taxation. Let us not forget that the salaries and wages of workers is barely constant. As excise taxes increase, the purchasing power of the workers, reduce by greater margins, worsening the welfare of workers through increased cost of living.
Also important is for the government to put in place measures that will ensure that the revenue collected from the excise tax is used to improve the welfare of the workers. This is necessary to compensate the workers for the loss suffered due to the tax paid to the government.
Most importantly, the government should come up with an inclusive tax administration system that aligns the taxation by both the national and county governments. Currently many County Governments are increasingly imposing punitive taxes on workers. This means that the implementation of the excise tax Act, 2015 is another cost for workers to bear, draining their spending power further.
Finally, let the government remember that by taking away too much from the workers’ income, national consumption, savings and investments reduce drastically thereby reducing the growth domestic product (GDP).This has far much negative effects on economic growth and development.
As we conclude, COTU (K) wishes to warn the government of draining workers’ purchasing power punitively. Let us embrace fairness, justice and accountability in tax administration. We stand in solidarity for fair and uniform excise taxation for beverages. Let us embrace equality and freedom from discrimination in public administration.