For a long time, the taxman's basket of excise taxes was nearly full of collections from individuals who could hardly resist a nicotine rush or a sip of the frothy stuff.  Because excise taxes were drawn mainly from cigarettes and alcohol they were christened 'sin taxes'. But the government has since found a new cash cow for excise taxes.  The latest Economic Survey by the Kenya National Bureau of Statistics (KNBS) shows that collection from financial transactions and airtime has overtaken 'sin taxes' to become the leading source of excise duty, as the government expands the basket of excisable products beyond alcohol and tobacco. In the financial year 2022/24, excise duty from financial transactions and airtime amounted to Sh80 billion compared to Sh62.66 billion from alcoholic beverages and cigarettes, data from KNBS shows. A big chunk of the financial transactions includes fees on mobile money transfers such as Safaricom's M-Pesa through which more than half of the country's economy is transacted.  The collection of excise taxes from financial transactions and airtime first overtook those from alcohol and cigarettes in the year ending June 2022 and the gap has since grown bigger as activities around money transfers and telecommunications services have increased. Excise taxes on financial transactions and airtime now account for 47.9 percent of the total collections compared to 37.5 percent on alcoholic drinks and tobacco products, analysis of data from the National Treasury shows. Excise taxes tend to target such harmful products as alcohol and cigarettes, not only to discourage people from engaging in those activities but also to raise taxes from consumers who will not be scared by a higher cost. Although the collection of excise duty from beer increased last year, there are also fears that consumption per unit might have dropped as consumers go for cheaper alternatives, including counterfeit drinks. Similarly, a combination of health awareness campaigns, regulations and punitive taxes, have made smoking unpopular. With the revenue streams from tobacco and alcohol drying up, the government has turned to new areas such as financial transactions and airtime to increase revenues to finance its ever-expanding budget. Robert Waruiru, a tax expert, reckons that this points to the critical role that financial inclusion plays. "I also think it demonstrates the elastic nature of demand for tobacco and cigarettes, which should hopefully inform our future tax and fiscal policy," said Mr Waruiru. "This also shows the diminishing disposable income for individuals and highlights the need to review PAYE (pay-as-you-earn) structure," he added. In the proposed revenue-raising measures for the financial year 2024/25, starting in July, the government expects to collect more from financial transactions and spirits through fresh amendments. Excise duty on fees on financial transactions, including banking fees, will rise to 20 percent from the current 15 percent should the National Assembly approve Treasury proposals. The Finance Bill 2024 has also proposed higher taxes on spirits by applying the duty based on pure alcohol content. Excise duty on tobacco products has been increased as the government moves to harmonise taxes on cigarettes with filters with those without filters. "Excise duty is a tax imposed by the government on certain products with negative externalities to discourage their consumption. In addition, excise duty is also charged on other goods and services to generate revenue," said the National Treasury in the 2023 Medium Term Revenue Strategy. In the medium term, President William Ruto's administration has indicated its intention to review excise duty on petroleum products, betting and gaming; and introduce excise duty on coal and other goods with harmful health effects such as sugar. The basket of excise taxes has evolved from the 1980s and 1990s when it was dominated by alcohol and tobacco products at 80 percent.   But since being introduced in 2015, financial transactions is the single largest contributor towards the excise duty pot, with the Kenya Revenue Authority (KRA) collecting S5.19 billion from mobile money transfer services and airtime. The taxes on airtime and financial transactions mirrored Safaricom's revenue performance on telephone services and M-Pesa for the financial year ended March 2024. M-Pesa revenue grew 19.5 percent to Sh140 billion while data revenue rose 25 percent to 67.4 percent. Voice revenue retreated by 0.6 percent to Sh80.5 billion while messaging revenue went up 8.3 percent to Sh12.3 billion. Data from the Economic Survey 2024 published by the statistics office shows that the government collected excise duty amounting to S5.19 billion from financial transactions in the financial year 2022/23, an increase of 10.5 percent from S0.89 billion collected in the previous period.  Excise duty, popularly known as six tax, had for long been slapped on luxurious and harmful products such as alcohol, cigarettes, gambling, juice, motor vehicles, soft drinks and cosmetics. However, the government expanded the list of excisable goods to include airtime, financial transactions, fuel, and internet data services.  In financial year 2022/23, collections from beer recovered from a dip of Sh27.35 billion to Sh32.09 billion. Excise from wines and spirits, another category of alcoholic beverages which includes Vodka, Whiskey and Gin, also dropped marginally to Sh18.9 billion as sales declined due to increased taxation which depressed imports and production.