British American Tobacco (BAT) Kenya is eyeing for a three-year tax holiday on local production of nicotine pouches and similar products.
The firm says it has begun talks with the Treasury and the Kenya Revenue Authority (KRA) to have the non-combustible pouches exempted from exercise duty for two to three years, at the same time lower taxation on cigarettes.
British American Tobacco (BAT) Kenya is pushing for a three-year tax holiday on local production of nicotine pouches and similar products at its $25 million (Sh2.7 billion) plant.
The BAT managing director Beverley Spencer-Obatoyinbo said the tax holiday will enable the firm to start manufacturing and establish a distribution network for local sales and exports in East African Community member states as well as the 21-member Comesa markets.
Beverley argues that the oral nicotine pouches – consumed by being put between the upper lip and gum, seen as the alternative to smoking – are the modern products that should not be slapped with punitive taxes as those on cigarettes.
“I expect that there would be no excise on this category due to the size of foreign direct investment. We are looking at a holiday of two-three years to start the manufacturing, distribution, and sales of this category, and also give us a chance to establish exports,” Spencer-Obatoyinbo told the Business Daily on Thursday.
“We believe that based on its reduced harm profile, excise tax paid should be significantly lower than cigarettes.”
The firm began importing the new tobacco-free category into Kenya in the third quarter of 2019 and is planning to start local production of the oral nicotine pouches after opening its factory in Nairobi targeting the African market.
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The gradual switch from tobacco to nicotine pouches is likely to affect Kenya leaf farmers who depend on the cigarette industry for livelihood.
“We have a very long and stable relationship with farmers. Our objective over the short-term is to continue that relationship,” Spencer-Obatoyinbo told Business Daily.
“Looking forward, there will need to be discussions with leaf farmers in terms of how all these categories all come together. The nicotine that is currently utilized in pouches is produced in Switzerland … and is drawn from tobacco leaves, and the Kenyan leaf fits in the global leaf that BAT purchases.”
