The company on Wednesday said that the Treasury’s hybrid system meant to introduce taxes based on physical size of cigarettes and retail selling price of cigarettes could not work because it created discrimination among cigarettes.
The 2010/2011 Budget had proposed hybrid excise structure comprising physical characteristics and retail selling price, but the Parliament’s Finance Committee made amendment to have duty on cigarette determined only by retail selling price.
Consequently, KRA commissioner general, Michael Waweru last week said that the alteration resulted in reduced cigarette prices and as a result tax collection also came down thus eroding overall government tax revenue targets.
Mastermind said that the physical characteristics amended by Parliament had not been proposed by industry stakeholders nor were the amendments agreed with the parliamentary committee.
Treasury had intended duty to be based on cigarette physical characteristics — whether the cigarette has filter or not, has soft or hard packaging and whether it has hinge lid or not — and its selling price.
The company said that the hybrid system, which introduced physical size of cigarettes and retail selling price of cigarettes, could not work because size was interpreted as being dominant.
It further said the classification was ambiguous, as the parameter of measure was not defined leading to varied interpretations.
“It is not an issue of revenue, but a question of addressing a tax problem on equitable basis so that all taxpayers receive equality of treatment,” Mastermind said in a statement released on Wednesday. “The hybrid structure introduced a strange measure for cigarettes known as 72-millimetre while in Kenya the bulk of cigarettes are above 84-millimetres in length which led to inequity, discrimination and instability.”
The company said Parliament was right in correcting the anomaly in order for the cigarettes taxation to be fair and equitable amongst all the players.
source: www.nation.co.ke
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