21–day tax agony for SMEs on consolidated cargo rule by KRA
The implementation of a cargo consolidation plan has handed Kenya Revenue Authority (KRA) room to widen its net on small-scale traders who import in pools.
Kenya Revenue Authority today directed all traders, including those who ship their goods through a cargo consolidator, to pay taxes on their cargo per item and have them cleared within 21 days, or be auctioned.
According to the taxman, the directive is aimed at addressing cases of tax evasion through false declaration, but is seemingly turning into a crisis with a lot of traders complaining of clearance delays.
Taxes on consolidated cargo has for a while been paid per kilo, creating an opportunity for mis-invoicing through which the state has been losing billions of shillings in revenues.
With trade mis-invoicing, importers under-declare the price of an imported item, a practice that is common with the consolidation of imported goods.
Different small scale traders who deal in items such as mobile phones, laptops, toys or second-hand clothes have long been importing through a cargo consolidator.
“KRA reminds importers and consolidators importing goods for trade purposes to ensure that shipping documents are correctly addressed in the importer’s name.” David Mwangi, the Acting Commissioner for Customs and Border Control, said.
“Where goods are shipped through a cargo consolidator, the importer should require the consolidator to issue them with a house air waybill or house bill of lading, showing the importer’s name as the ultimate consignee for the individual consignment.”
KRA noted that as soon as the cargo reaches the country, the consolidator will be required to unbundle it and allow for individual clearance.
In view of the directive, KRA encourages all importers and consolidators to familiarize themselves with the applicable rates of duty, and ensure that any declarations made to customs are compliant with the law.
With this latest directive, it means that these items, most of which end up in open-air markets such as Nairobi’s Gikomba and Nyamakima, will now attract import duties, value-added tax (VAT), excise duty, import declaration levy (IDL) and Railway Development Levy (RDL).
This will increase the cost of consolidated cargo, which at the moment attracts a duty of Sh200 per kilo for air cargo or Sh2.2 million for a 40-foot container brought in by sea.
Consolidators were charging traders Sh992 ($7) for a kilo of cargo transported through the air and Sh709 ($5) shipped by sea.
Before de-consolidation, for example, traders would pay the same tax rates for smartphone brands of iPhone and Redmi. But with the new requirement that taxes be paid per value of the item, importers are paying more for the more expensive iPhone.
Experts have also questioned the capacity of the KRA to deconsolidate all the cargo imported in pools, a move that has resulted in delays in the clearance of some goods at various points of entry, including seaports and airports.
A trader, who spoke on condition of anonymity, confessed to The Informer that his cargo, which is an assortment of items, has been stuck at the Eldoret International Airport for over two months.
On the other hand, one consolidator by name Superb Cargo, welcomed the move by the KRA noting that the requirement is neither new nor a blow to them.
“This is just firming up the stipulations and going by the book. Lots of tax evasion has been happening with clearance based on weight charges. The KRA is tightening the belt.” Superb Cargo said.
The shift is one of the measures through which the administration of president William Ruto will be hoping to unlock billions of shillings in tax revenues as it targets to collect as much as Sh2.57 trillion this financial year.
