Ministry eyes excise duty proceeds to boost export

Thursday, June 8th, 2023 09:00 | By
30,000 Kenyans already contributing to Housing Fund- CS Moses Kuria
Trade CS Moses Kuria. PHOTO/Courtesy

Ministry of Trade is in a last-minute push to have the proceeds of the newly introduced excise duty on furniture diverted into an export promotion fund, whose regulation is yet to be published, once Parliament ratifies the proposed Finance Bill 2023.

Excise duty on imported furniture has been proposed at 30 per cent from the previous zero-rating, but the ministry wants this to be revised in the final bill to allow it utilise the proceeds in promoting investment and export activities.

Principal Secretary for Investment Promotion, Abubakar Hassan, told the Finance and National Planning Committee on Tuesday  that the inclusion of imported furniture under the excise duty schedule was a mistake in the proposed Bill thus needs to be rectified.

Levy schedule

“We will request that 30 per cent excise duty on furniture be moved from excise schedule to the export levy schedule. It is because of the purpose of the levy which will be used to promote investment and export,” Abubakar told the committee led by Molo legislator Kuria Kimani.

The proposal by the department of promotion to introduce the export levy of 10 per cent was carried in the finance bill targeting clinker cement, billets, paper, and furniture which are considered s to have local production in the country. 

The ministry had initially proposed the levy to be 25 per cent to discourage the influx importation of the targeted products but the National Treasury slashed the rate to 10 per cent, dealing a blow to the ministry’s target of collecting Sh1.2 billion annually from the levy.

At 10 per cent levy rate, the ministry projects it can now net only Sh400 million per year should parliament ratify this proposal without fresh changes. The levy is aimed at protecting Kenya’s local manufacturers, promote export, and attracting investors.

The export levy, like the House Levy, is facing regulatory hitches, with the committee poking holes on possible misuse, exact utilisation, and where the fund will be domiciled. “We will establish the Fund and regulation will be ready before operationalisation. Once approved, the Treasury will set the fund to receive the levy,” added Abubakar. Miscellaneous levies are often collected by Kenya Revenue Authority (KRA) on behalf of the concerned State entity or ministry for their own utilisation.

A portion of the export levy proceeds will go into promoting investment and export of nine different value chains prioritised by the current regime despite some of them not set to face the 10 per cent levy during importation.

These value chains, which have received a proposed budget of Sh267.7 billion in the upcoming financial year, comprise Cotton to Textile and Apparel, Edible Oil crop production, Dairy, Leather and Leather products, Rice production, and Tea. Others include blue economy, minerals and tree planting, and construction and building materials.

International market

The brands, except for construction and minerals, are currently being positioned for the international market, especially the European Union (EU) and the United States by Kenya Export Promotion and Branding Agency (KEPROBA), the state agency mandated to promote Kenya’s products.

Kenya is already witnessing domestic shortage, save for tea, in the volumes of the above nine targeted value chain products, leaving the country hugely dependent on importations to bridge the gaps.

Trade ministry targets to attract foreign investment worth at least Sh1.2 trillion from the European Union alone this year.

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