New taxes trigger push for higher pay in corporate Kenya

Central Organisation of Trade Union (Cotu) Secretary-General Francis Atwoli. PHOTO | FILE  

By BD REPORTER

In Summary

• Cotu has directed its 42 affiliate unions to write to their employers seeking a review of the existing collective bargaining agreements.
• This, according to Cotu Secretary-general Francis Atwoli, will help cushion workers against the rising cost of living and taxes set to be imposed on essential commodities.
• Employers warn that the push for wage increases would prompt companies to put a freeze in employment or move jobs to countries where labour is cheaper.

Trade unions are now demanding an increase in workers’ pay to cushion them against the rising cost of living and taxes set to be imposed by the government.

The Central Organisation of Trade Unions (Cotu) has directed its 42 affiliate unions to write to their employers seeking a review of the existing collective bargaining agreements (CBA).

Secretary-general Francis Atwoli said the decision was arrived at following the government’s decision to raise taxes on essential commodities in a bid to raise more revenue.

“The current hard economic times have badly hit workers, who are now unable to afford essential commodities like food, rent, transport to work, medical cover and fees for their children,” said Mr Atwoli.

Cars, beer, cigarettes, juices and water will cost more once President Uhuru Kenyatta assents to the Excise Duty Bill.

The higher taxes were introduced by Treasury secretary Henry Rotich in June to raise an additional Sh25 billion factored in the current budget.

The Treasury slapped a Sh200,000 excise tax on all vehicles more than three years old from the date of first registration and Sh150, 000 on newer vehicles.

Motorcycles will attract excise tax at Sh10,000 per unit, hitting the boda boda business hard. MPs had dropped the tax on motorcycles.

Cigarettes, which are currently taxed at the higher rate of Sh1,200 per 1,000 sticks (mille) or 35 per cent of the retail sales price, will see the rate more than double to Sh2,500 per mille.

Fruit and vegetable juices will attract Sh10 per litre tax. Water will attract a tax of Sh10 per litre, up from Sh3.

Rising housing rent and food and energy prices pushed up Kenya’s inflation in the year to October to 6.72 per cent from 5.97 per cent a month earlier.

READ: MPs fail to stop Uhuru’s higher taxes on cars, beer, water, juice

The central bank has a medium-term inflation target range of between 2.5 per cent and 7.5 per cent.

The government is also faced with a cash crunch leading to delayed payment of essential services and stalled projects.

Government borrowing from the domestic market has raised bank interest rates to a high of 27 per cent.

The Cotu boss said the Jubilee government came to power promising a brighter future for Kenyan workers and an improved economy.

“The situation is increasingly growing from bad to worse, with news of stolen billions and a government determined to raid workers’ pockets making headlines in our local media,” he said.

The secretary-general asked the government not to renege on its primary responsibility of protecting vulnerable groups and lowly paid workers.

Employers warn that the push for wage increases would prompt companies to put a freeze in employment or move jobs to countries where labour is cheaper.

Mr Atwoli said the handling of workers by the Jubilee government would determine the outcome of the 2017 elections.