The Kenya Association of Manufacturers (KAM) has backed proposal to impose levy on imported finished products to safeguard local industries contained in the contentious proposed Finance Bill 2023.
The Finance Bill 2023, published by the National Assembly on April 28, 2023 seeks to amend laws relating to various taxes and duties while proposing new taxes, regulations, and incentives, a move likely to affect different sectors of the economy and hitting the common man pocket hard.
“KAM is not opposed to the imposition of a levy aimed at promoting and safeguarding local industries from imported finished products in the country. The imposition of the levy on finished products is a welcome move with exceptions of finished goods originating from East Africa Community’s Custom Union and current or future Free Trade Areas (FTAs) signed with Kenya to avoid violation of National Treatment and Most-Favoured Nations (MFN) rules. In fact, KAM has been advocating for policy and fiscal interventions to promote local manufacturing,” a statement to newsrooms from KAM Chairman Rajan Shah said.
The Bill contains a proposed ten per cent Export Development and Promotion Levy on certain imported products, with which local manufacturers have taken issue.
Under the umbrella of Kenya Association of Manufacturers (KAM), they then engaged their members on the Bill and thereafter presented, a memorandum of its members’ feedback to the National Assembly’s Departmental Committee on Finance and National Planning.
Among the products earmarked to attract the levy, include raw materials and intermediate products such as clinker, metal products (wire rods and billets) and packaging paper products.
“The Association is however concerned and opposed to the imposition of levies on imported raw materials and intermediate goods. Imposing levies on imported raw materials and intermediate products shall make Kenya uncompetitive compared to other EAC Partner States. This import levy on raw materials goes against the established taxation regimes such as EAC Common External Tariff (CET) and export-led Duty Remission Scheme (DRS).” Rajan added.
Under the current EAC CET review, the EAC Partner States adopted a 4-band structure (0 per cent -raw materials; 10 per cent – intermediate raw materials (products not available in EAC); 25 per cent -intermediate raw material (products available in the region); and 35 per cent – finished products). Currently, clinker, wire and billets attract 10 per cent, 25 per cent and 0 per cent respectively in the just approved EAC CET.
An addition of 10 per cent levy on imported raw materials and intermediate products will render Kenyan products uncompetitive compared to EAC Partner States and within the African Continental Free Trade Area (AfCFTA). This move will have immediate effect of negative trade flows with our regional partners, Shah continues to say.
“It is our position and proposal therefore that the 10 per cent Export Development and Promotion Levy on imports should spare raw materials and intermediate products, and instead, charge it on finished products only, except for goods originating from EAC Partner States due to Custom Unions Protocols, and countries with Free Trade Area (FTA) agreements with Kenya like the Common Market for Eastern and Southern Africa (COMESA) and Africa Continental Free Trade Agreement (AfCFTA).” Rajan noted.
He added that they will remain committed to working closely with Government on increasing the manufacturing sector’s contribution to the Gross Domestic Product (GDP).
As pressure continues to pile on the National Assembly to consider the plight of poor Kenyans and drop or amend the Bill before passing it, the manufacturers wait with bated breath to see if their recommendations will be put to consideration.
