Over the past five years, Kenya has experienced a notable shift in its excise tax landscape, with traditional revenue generators such as beer and cigarettes witnessing a decline, while unexpected sectors like airtime and financial transactions show a remarkable surge, according to a report released by the Kenya National Bureau of Statistics (KNBS).

Excise taxes, imposed on specific goods or services, are integral to the government's revenue-generation strategy.

However, recent data reveals a 0.5 per cent decrease in excise taxes from beer and an 8.2 per cent drop from cigarettes over the specified period.

In contrast, airtime-related excise duty experienced an impressive upswing of 117.6 per cent, reaching Sh39 billion, while revenues from financial transactions soared by 120.6 per cent to Sh40.9 billion.

The shift in revenue patterns raises questions about the original intent of excise taxes.

The National Assembly's Finance Committee recently emphasized that these taxes were initially conceived to target harmful products, aiming to address the negative externalities or social costs associated with their consumption.

The committee's report acknowledged the evolving landscape and debated the inclusion of non-harmful products in the excise tax ambit, emphasizing that the tax should ideally focus on harmful components or their closest substitutes.

The current application of excise duty on products like financial services, water, airtime, and data has prompted concerns among Members of Parliament (MPs), who argue that it appears geared towards revenue generation rather than addressing harmful externalities.

MPs contend that applying excise duty to products lacking proven harm, such as financial services, operates as an additional form of Value Added Tax (VAT) that becomes burdensome for end consumers.

In response to this, MPs are advocating for the exclusion of non-harmful products from excise duty, urging a reevaluation of the tax system to protect such items from what they view as an unjustified financial burden on consumers.

As the debate on excise taxes continues, stakeholders await potential policy adjustments that could reshape the taxation landscape, ensuring a balance between revenue generation and the original purpose of discouraging the consumption of harmful products.