BAT tax exemptions prick anti-tobacco lobby group
Anti-tobacco advocates are up in arms over an application by cigarette maker’s — British American Tobacco Kenya (BAT) Kenya Ltd — for tax exemption of tobacco pouches it is about to start producing in the country.
Yesterday, the International Institute for Legislative Affairs (IILA) said that if the proposed tax holiday if granted to BAT, it will be a major setback to the public health protection agenda advanced by tobacco control policies and interventions currently ongoing in Kenya.
Celine Awuor, the chief executive of IILA said that the World Health Organisation’s Framework Convention on Tobacco Control’s (FCTC’s) Article 5.3 guidelines state that the tobacco industry should not be granted incentives to establish or run their businesses given that their products are lethal.
“In light of the above, specifically, in granting BAT the tax exemptions, the targeted government agencies (National Treasury and KRA) will be going against provisions of the FCTC — which Kenya is a party to; the national Tobacco Control Act (TCA) 2007 and the TC Regulations 2014,” she said in a statement.
The TCA 2007 in Section 12(a) requires the Minister in charge of finance to “implement tax policies and where appropriate, price policies on tobacco and tobacco products so as to contribute to the objectives of the Act”.
Six months ago, BAT announced plans to establish a plant in Kenya to manufacture their nicotine pouches LYFT for distribution within the African market.
And just last week, it emerged that the plant is nearing completion and that BAT was in talks with Treasury and KRA to have the locally produced pouches exempted from excise duty for two to three years and subsequently lower tax rates.
The company reckons that the tax holiday is justified by the size of foreign direct investment (FDI) expected from the local plant production and export market; and their belief that the pouches are less harmful than cigarettes hence should be taxed less.
However, in reaction, Awuor called on the government to stand up to its commitment to promote public health as well as obligations under the WHO-FCTC and national TC policies.
“The government of Kenya should instead take the necessary measures to ensure effective implementation of these policies.
Notably, the government needs to implement recommendations given under the FCTC Article 5.3 and its guidelines, which require parties to not grant incentives, privileges or benefits to the tobacco industry to establish or run their businesses as well as to not provide any preferential tax exemption to the tobacco industry,” she added.
Prohibited from incentives
Additionally, Awuor said that the TC Regulations 2014, in Section 32 prohibit a public authority from granting incentives, privileges, benefits or any other preferential treatment to the tobacco industry to establish or run their businesses.
In Section 33 (1) of the Regulations further state that “A public authority shall, while implementing investment and tax laws, and other polices related to tobacco, be guided by the priority to tackle the adverse health, social, economic and environmental impacts of tobacco growing, manufacture, sale and consumption in Kenya”.
“Sadly though, these provisions are at risk of being flouted if the proposals by BAT are granted,” she added.
In the past five years, Kenya has made significant progress in reforming, establishing and implementing tobacco tax structures in line with recommendations of the WHO-FCTC.