Cosmetologists lament over proposal to increase taxation on beauty products

Nyeri, Wednesday, 24, May, 2023

KNA by Samuel Maina/ Kelvin Muthukumi

Cosmetologists in Nyeri have expressed fears over the proposed increase in taxation on beauty products claiming the move may end up hurting their already struggling businesses.

In the Excise Duty (Excisable Goods Management System- EGMS) (Amendment) Regulations, 2023, the taxman plans to raise excise stamp charges for beauty and cosmetic products from Sh0.6 to Sh2.5 per stamp.

Official data from the Kenya National Bureau of Statistics show the beauty industry has grown by over Sh10 billion over the past decade as more Kenyans take to the use of makeup and other beauty products.

For instance, imports of essential oils and perfumes alone rose from Sh21.9 billion to Sh26.3 billion between 2017 and 2021.

But Maggie Wanjiru, a beautician in Nyeri town told KNA the new tax proposal on beauty products would leave them with no option but to pass any additional costs to their clients.

She however says she fears any attempt to charge an extra shilling to their customers may prove counterproductive owing to the hard economic times the country is going through.

“The taxes we are currently paying are already a burden on us and any talk of increasing levies on beauty products will therefore be too much for us. Should the government go ahead and slap additional taxes on cosmetics and other beauty products, many will soon be out of business since few of our customers will be willing to part with an extra coin in form of hiked charges,” she says.

Her sentiments are echoed by Angela Njoroge, a nail art specialist who argues that adjusting their charges upward would only end up chasing their clients away.

Ms Njoroge laments that many Kenyans have other pressing issues apart from visiting beauty parlours and therefore any attempt to increase taxes on beauty products may just prove to be the ideal death knell to their businesses.

“Our clientele comprises mainly campus students and people from the working class who visit our shops to either have their nails, hair or facial make-ups. But once they realise the costs for such services have been increased, they will walk away and look for places where they can get cheaper services. People are nowadays looking for places where they can save the little money, they have due to the prevailing hard economic times,” she points out.

Angela adds that there is high competition within the beauty industry and customers will tend to associate with the business that offer services at cheaper prices.

Dedan Kibui, a loctician, told KNA he fears once the government implements the new taxes on July 1, the majority of his customers will quietly walk away.

Kibui says many people who love trendy hairstyles like dreadlocks will most certainly have their hair done at home where they could still have their favourite styles done at a subsidized cost.

“We are staring at the real threat of seeing our businesses going down due to loss of customers. I fear we are soon going to see clients who used to visit our shops opting to have their hair done in the village where the charges are friendlier,” he states.

The government tabled the Finance Bill 2023 (currently undergoing public participation) before the National Assembly on May 4 2023 to enable Treasury net additional revenues of up to Sh289.3 billion and stimulate the country's economic growth by an estimated 6.1 per cent margin.

The Government intends to inject additional cash to finance the Bottom-up Economic Transformation Agenda for inclusive growth (BETA) amidst an economy that is caught up in a tight fiscal space, economic shocks wrought by a shilling on a free -fall and external debt obligations maturing in quick succession.

According to the Budget Policy Statement (BPS), the Government intends to mobilize domestic revenues of up to Sh2.9 trillion in its Sh3.6 trillion budget for the 2023/2024 financial year leaving it with a deficit of Sh768.2 billion.

Kibui has also called for protections of local investors which he says are facing threat from an influx of cheap imports mainly from mainland China.

He argues that the only way Kenya could have a competitive edge over her trading partners is by increasing her export volume to ensure she injects enough foreign currency into the local economy.

The business magnate has also challenged local institutions of higher learning to train enough graduates who can take up jobs currently being given to expatriates from other countries such as China and in the process denying job opportunities to local graduates.

“We are asking the government to look into the issue of businesses, manufacturing and also think of importation which is coming into Kenya and destroying the economy of this country. We are not bringing any resources into Kenya but only taking our money to other countries. Why should we import something that can be made in Kenya,” he posed.

Apart from the proposed VAT hike on petroleum products, other notable changes in the Finance Bill include the introduction of a new 35 per cent tax rate for those earning more than Sh500,000 a month, taxation of content creation and trade in digital assets such as crypto currency.

Other levies include a 3 percent deduction from employees’ basic salary towards the affordable housing programme, a proposal that has elicited stiff resistance from workers’ unions who argue that such a move will drive hundreds of government employees into perpetual penury.

If the Bill is passed by Parliament, Ruto is expected to assent to the new tax regulations that will become law by July 1 this year.

Already, audit and tax advisory firm KPMG has warned that the introduction of new taxes would only worsen an already bad situation for Kenyans majority of who are grappling with the high cost of living.

The firm notes that the new Bill combined with increases in NHIF and NSSF contributions would prove a tough sell in a country where 16 per cent of her population live below the international poverty line.

“This (VAT on fuel) proposal is likely to impact the prices of transport and production of goods increasing the inflationary pressure in the economy…When combined with the proposed changes in NHIF and the recent changes in national pension contributions, the impact on employees will be severe especially at a time when many are grappling with the high cost of living,” reads part of KPMG report analysis on the Finance Bill 2023.

Courtesy ; K. N. A