Industry raises concerns on shrinking market due to unpredictable tax measures

Manufacturers have raised concerns on shrinking market share due to, among others, unpredictable tax measures making industry uncompetitive, and derogated EAC Common External Tariff (CET) regime, undermining industrialization efforts in the region.

Whilst opening the forum, Kenya Association of Manufacturers (KAM) Chief Executive, Ms Phyllis Wakiaga, remarked that a healthy manufacturing sector is a prerequisite for the growth and development of our country. 

“The role of manufacturing in driving economic growth is particularly crucial today, as the country navigates through COVID-19 pandemic. Critical for this is a stable tax policy. However, some of the measures introduced through the Finance Act are at the expense of previous tax incentives and benefits that would otherwise form part of the backbone for the post-pandemic economic recovery phase,” explained Ms Wakiaga.

On the EAC Budget outcomes, Ms Wakiaga noted that, “Whilst the EAC, through the June 2020 EAC Gazette Notice, has approved measures generally geared towards promoting industrialization, encouraging local investments and promoting local production of COVID-19 Personal Protective Equipment, among others, the Partner States have derogated the existing EAC CET, which is undermining industrialization efforts in the region by favouring imported products.”

Institute of Economic Affairs CEO, Mr Kwame Owino said that tax systems are getting more complex, negating the goals to expand market access. He highlighted the need to simplify taxation laws, reduce the administrative burden of Kenya’s tax code and  finalize the review of the CET to promote competitiveness of local industries.

Responding to the concerns raised, Kenya Revenue Authority (KRA) Deputy Commissioner, Policy & Tax Advisory, Mr Caxton Masudi mentioned that the government is keen on developing a comprehensive fiscal policy that enables long-term tax regimes and simplification of tax laws. He however observed that industry should look into non-tax measures to boost consumption as opposed to tax measures.

Speaking on behalf of the Ministry of Industrialization, Trade & Enterprise Development Cabinet Secretary, Mr Stephen Odua, the Director, Private Sector Development, State Department of Industrialization, noted that the government is keen on promoting local manufacturing.

“COVID-19 has brought about the realization that we need to shorten our supply chains and engage in the local manufacture of goods that have demand in the Country and the region. Our economic bounce-back will come from a well thought-through strategy. As leaders in the region, we are cognizant of our production capacity and seek to fill in the gap left by the disruptions in supply chains. The government is also keen on finalizing the CET review process to promote industrialization and competitiveness of our manufacturing sector,” added Mr Odua.

The forum, hosted by KAM and KRA, sought to analyse the impact of 2020 half-year Manufacturing Tax Proposals on the sector’s economic growth strategy. It brought together representatives from government, economic think-tanks and industrialists.

Click here to listen to the conversation.