The National Assembly published the Finance Bill, 2023 on 28th April 2023 that seeks to amend laws relating to various taxes and duties while proposing new taxes, regulations, and incentives. Kenya Association of Manufacturers (KAM) engaged its members on the Bill and thereafter presented to the National Assembly’s Departmental Committee on Finance and National Planning, on 24th May 2023, a memorandum of its members’ feedback, concerns, and proposals.
KAM would like to provide clarity on its position regarding the proposed 10% Export Development and Promotion Levy on certain imported products. 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. Our position is as follows:
That, 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.
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).
Under the current EAC CET review, the EAC Partner States adopted a 4-band structure (0% -raw materials; 10% – intermediate raw materials (products not available in EAC); 25% -intermediate raw material (products available in the region); and 35% – finished products). Currently, clinker, wire and billets attract 10%, 25% and 0% respectively in the just approved EAC CET.
An addition of 10% 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.
It is our position and proposal therefore that the 10% 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). We remain committed to working closely with Government on increasing the manufacturing sector’s contribution to the Gross Domestic Product.