TAX ROW

KRA denies responsibility in import duties stand-off

Manufacturers have decried failure by the State to implement the new IDF rates of 1.5% for imported raw materials and intermediate goods.

In Summary

•Importers say the taxman continues to charge the levies at the rate of finished goods, 3.5 per cent IDF and two per cent (2%) RDL rates, leading to an extra 2.5 per cent cumulatively.

•KRA says there lacks a substantial list of approved manufacturers and their corresponding imported raw materials and intermediate goods leading to some players being locked out.

Containerised cargo being offloaded at the Port of Mombasa /VICTOR IMBOTO
Containerised cargo being offloaded at the Port of Mombasa /VICTOR IMBOTO

The stand-off between Kenya Revenue Authority(KRA) and importers on 'unwarranted' taxation of raw materials and intermediate goods has taken a new twist after the taxman denied responsibility.

Yesterday, KRA refuted claims it has ignored provisions under the Finance Act 2019 which gives preferential Import Declaration Fee (IDF) and Railway Development Levy (RDL) rates for some goods.

Manufacturers in a letter dated January 20, to Treasury CS Ukur Yatani, decried failure by the state to implement the new rates of 1.5 per cent for imported raw materials and intermediate goods.

This, they say, has impacted businesses negatively on the cost of importation of industrial inputs.

A communique' seen by the Star indicates the taxman continues to charge the levies at the rate of finished goods, 3.5 per cent IDF and two per cent (2%) RDL rates, leading to manufacturers paying an extra 2.5 per cent cumulatively.

 National Treasury in the current financial year  proposed to reduce the IDF on intermediate goods and raw materials used by manufacturers from two per cent to 1.5 per cent.

It increased the rate on finished goods from two per cent to 3.5 per cent while Railway Development Levy for finished products was raised from 1.5 per cent to two per cent.

These, Treasury said, would cushion local manufacturers from cheaper imports and “facilitate the growth of the sector.” The new rates were gazetted on November 7, 2019.

“Up to date, the manufacturers have not realized the benefits therein,” the Kenya Association of Manufacturers CEO Phyllis Wakiaga said in the letter.

The absence of a list of approved manufacturers and their corresponding imported raw materials and intermediate goods has since played out.

KRA Commissioner for Customs and Border Control Kevin Safari yesterday defended the current rate application, saying there lacks a proper listings of qualified importers and goods which should enjoy the lower IDF and RDL rates.

“One point that we need to take a note in the Finance Act was that the reduced rates were for approved manufacturers and their raw materials. This is informed by advice from the ministry of industrialization, then they forward the list to National Treasury whom then gives us the approved list,” Safari said.

“So to make sure that there is no abuse, we deal with those manufacturers who are recognized and recommended to KRA by National Treasury and of course the approved list of materials,” he added.

On the contrary, KAM says the list of raw materials and intermediate goods exempt from Pre-Verification of Conformity (PVoC) program was shared with the then Ministry of Industry, Trade and Cooperatives , Treasury and KRA for implementation.

This is before KAM moves to generate its own list covering sectors whose raw materials and intermediate goods are not regulated by Kebs such as veterinary medicine department and Pharmacy and Poisons Board for pharmaceutical sector.

Also, raw materials and intermediate goods under Duty Remission Scheme and EAC Stay of Application like industrial sugar and timber are not in the PVoC list of exemptions.

KRA has however maintained innocence insisting it is “committed to support ease of doing business.”