Mastermind opposes proposed tax structure

Mastermind Tobacco Kenya is opposed to a new tax regime being proposed for the cigarette industry.

The cigarette maker claims it will not be an answer to reduced revenue collection from the sector.

In a statement on Monday, the company said the government would be playing to the whims of multinationals by employing the new tax structure.

“The planned change of excise taxation structure will not be the answer. A solution would be to robustly, faithfully and effectively administer the existing policies,” it said.

Under the new regime, cigarettes will be taxed at a fixed rate different from the current system with a four-band classification.

The rates are based on whether the cigarette is soft or hard cap, filter or non-filter and based on value.

Fixed rate taxation is widely championed by the World Health Organisation and has received the backing of another local manufacturer British American Tobacco-Kenya (BAT).

Mastermind has petitioned Treasury over the issue in the run up to the finalisation of the 2011/2012 budget proposals.

It says that proposals by WHO are aimed at increasing the prices of cigarettes through high taxation.

“Though said to have been applied in South Africa and Mauritius, the success rate is nothing to talk about as the two countries have some of the highest cases of illicit cigarettes, counterfeits, smuggling and tax evasion,” the petition reads.

Taxation wars in the tobacco industry have always seen the two firms play from the opposing sides.

Reduced tax collection by the Kenya Revenue Authority has been witnessed in the industry since an amendment the Finance Act (2010).

BAT reduced the pricing of its Sportsman flagship brand from Sh95 to Sh70 a packet moving them to a lower taxation band.

This is because current taxation is also based on ex-factory prices.