Increasing water taxes amidst drought in Kenya: a case for reform
Effective 1st of October 2022, the Commissioner General of the Kenya Revenue Authority(KRA), published Legal Notice 176 of 2022, on 3rd of October 2022, further to his powers under the Excise Duty Act, 2015. The notice adjusts excise duty rate of a number of items by 6.3% in light of the inflation rate for the financial year 2021/2022. Besides fruit juices, the Commissioner General also adjusted bottled water, and other similar packaged water.
Whilst many items provided in the list are the so called sin taxes (taxes levied on a specific activity or good that is deemed harmful to individuals or society), like sugar, beer and cigarettes, items like bottled water are bordering on basic food items, given that 43% of the population, about 17 million people, have challenges accessing clean water for drinking.
This is concerning because the Finance Bill, 2022 had proposed to increase excise duty (different from inflation adjustment) on bottled water, earlier on in the year, but this proposal faced objections, and was ultimately excluded in the final Act. This is also concerning because the Finance Act, 2022 had not only excluded this provision, but amended the Annual inflation adjustment provision to empower the Commissioner General to exempt specified products from inflation adjustment after considering the circumstances prevailing in the economy in that year. This provision was included to protect consumers from increase in prices due to annual inflation adjustments of specified products, that may be sensitive. It was intended to take effect from 1st of January 2023, only slightly more than 2 months away. The rationale to avoid increasing excise rates on bottled water in June 2022, is the same rationale to avoid imposing inflation adjustment currently- the lack of access to clean and safe drinking water amidst severe and worsening drought in Kenya.
Kenya has faced 3 droughts in the past decade. The current drought of 2020 – 2022 is by far the most severe and longest, with massive livelihood loses and increased displacement of populations. About 4.2 million people representing 24% of the arid and semi arid lands (ASAL) population in Kenya are currently facing acute food insecurity with about 2.7 million people in the Crisis phase and 785,000 people in the Emergency state. About 3.3 million people cannot get enough water to drink. And more than 2.4 million livestock, which pastoralist communities rely on for food and livelihood, have died in Kenya, due to lack of water and pasture.
This situation will only continue to get worse in November – December 2022, some of the hottest months of the year, with the Kenya Meteorological Department forecasting poor distribution of rainfall in both time and space, in much of the eastern parts of the country. This will be the 5th consecutive failed rainy season in the country. Inevitably, as evidenced with current killings and cattle raids, tensions and conflict over limited resources will increase as communities move in search of water and pasture.
Kenyans are currently grappling with elevated cost of living due to higher prices of many essential goods such as cooking oil, flour, milk and cooking gas. This is not the time to increase taxes on water. Making drinking water expensive is not just a challenge economically but it is also against Article 43 of the Constitution which guarantees every person the right to clean and safe water in adequate quantities.
Piped water to all in urban areas, and rehabilitation and solarization of boreholes in ASAL areas in Kenya will take time. In the meantime, bottled water is a current basic need. The new Cabinet Secretary for ASAL areas, Ms Rebecca Miano, with the support of the Commissioner General can, and should consider amending this on 1st of January 2023.
If you wish to learn more about water and climate change in Kenya, please reach out to me at halima@hawahussein.com
Photo credit: Jake Lyell https://www.childfund.org/Content/NewsDetail/2147489075/
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Effective 1st of October 2022, the Commissioner General of the Kenya Revenue Authority(KRA), published Legal Notice 176 of 2022, on 3rd of October 2022, further to his powers under the Excise Duty Act, 2015. The notice adjusts excise duty rate of a number of items by 6.3% in light of the inflation rate for the…