Importers stare at new taxes on revenue hunt
The government is considering imposing taxes and levies on imported products manufactured in Kenya to protect industries while increasing revenue collection.
Cabinet Secretary for Trade, Investment and Industry Moses Kuria said the move will first target steel, paper, furniture, wire rods, and billet products, meaning importers will be forced to either source them locally or face the tax-laden importation cost.
Pharmaceuticals will also be on the radar in the next round after the first phase of implementation.
“We will be imposing export levy on those products which we are importing but we have local capacity. Every time we import things for which we have local capacity, we are frustrating ourselves,” said Kuria during a media briefing yesterday.
“Cabinet has approved, in a preliminary basis. They are going to start seeing some items served some serious levies so that we are able to protect our industry,” Kuria added. The move, which is still in the preliminary stage and undergoing public participation, is mainly aimed at protecting Kenya’s domestic market, which has for long suffered from an influx of cheap products.
While he declined to disclose the precise rate at which the levy will be charged, the ministry is eyeing a revenue of $250 (Sh32,500) per tonne of steel, billets, and iron imported. The protection drive will offer much reprieve to local steel millers like Doshi Group, Tononoka Steel Ltd, and Devki Group, which recently opened a Sh30 billion steel plant in Kwale County.
The new levies, which are expected to be infused in the upcoming finance bill 2023, could also ease pressure on Kenya’s high import bill amid declining forex reserves that have the battered shilling. Products from East African Community (EAC) will be exempted from this levy, with Kenya being cautious of triggering a reactionary tax policy from other EAC members like DRC, where raw materials such as iron ore and coal are abundant.
National Treasury is believed to be courting potential areas where it can introduce new taxes or hike the charges to help the government meet its revenue collection targets and fund Kenya Kwanza’s first Sh3.64 trillion 2023/24 budget.
Kenya Revenue Authority (KRA) is expected to collect Sh3 trillion in tax revenues in the next fiscal year starting July, with Value-Added-Tax (VAT), import levies, and excise duty being some of the lucrative tax heads for the State.
Kenya remains a net importer of raw steel, mainly from China and India, the leading global producers, with local companies manufacturing various finished products. Steel is commonly used to make beams and columns, reinforcement bars, and windows and doors in the construction sector.
Kenya National Bureau of Statistics (KNBS), Kenya’s import bill widened further by 30.7 per cent to Sh2.15 trillion in the year ending December 2021, occasioned by high importation value under iron, steel, and industrial materials category. Industrial supplies account for the biggest part of Kenya’s import bill.
By second quarter ending June 2022, iron and steel importation slumped to 225,126 metric tonnes, representing about a 20 per cent decline compared to 2021 despite the prices of some steel products shooting up due to Russia-Ukraine tension.
Kenya has been trying to safeguard its manufacturing sector and improve its exports, but the gains are growing at a slow pace as it faces stiff competition from foreign markets, thus crowding local investors. Kenya Kwanza is targeting to increase the manufacturing sector’s contribution to the gross domestic product (GDP) to 15 per cent by the end of William Ruto’s first term, up from the current 7.2 per cent share.