Construction cost set to rise as KRA consolidates cess collection

The cost of construction in Nairobi could rise as the taxman pools building material transporters in groups for tax collection in the city.

This is part of new proposals by Kenya Revenue Authority (KRA), seeking to regulate the transportation of building materials business for efficient revenue collection.

According to KRA , the current procedure of cessing using road blocks erected at various locations along the transportation routes is cumbersome, risky and inconveniencing to transporters , county officers as well as other road users.

Even so not all building materials attract the cess tax, it only applies to stones, ballast, sand, quarry chips, murram and timber.

“KRA might think they are going to streamline the revenue collection but the introduction of this regulations will add the cost of transport for our customers,” said James Mbuthia, who transports building materials from Gikomba.

Mbuthia said that his business is not only restricted to Nairobi therefore when he goes to other counties he is still going to incur costs therefore this will be making their business a bit more costly.

“In a day I might just pay the county Sh250 to be able to transport, and if on a certain day I am not transporting materials in Nairobi I don't have to pay anything,” he said.

According to Tony Mburu who also operates from Gikomba, the move will have him transfer the increased cost of transport to his customers.

Peter Karanja who also transports construction materials says the move is welcome as his business is solely restricted to Nairobi therefore having the monthly payments will help in navigating his daily trips.

The development comes against the backdrop of a push by the county government to increase the levies to fund the Sh37.4billion 2020/21 budget.

As part of the new plan, all vehicles used to transport building materials will also need to be registered under a Sacco or with a transportation firm.

The Saccos or firms will then be required to make a monthly declaration of all the vehicles in their fleet and their corresponding tonnage.

Then each vehicle will be charged a monthly flat rate based on tonnage as defined in the Nairobi City County Finance Act 2013 to cater for all the trips to be undertaken in the month.

Upon payment, the organisation will be issued with stickers for all its vehicles with compliance monitoring and enforcement to be undertaken through Sacco or firm's compliance reports.

KRA’s Deputy Commissioner at the County Revenue Division, Annastaciah Githuba, said the implementation of the proposals, however, is going to be determined by  February 4, 2021, consultative meeting between the taxman and stakeholders in the business.

The country's construction sector recorded a 16.2 per cent growth in the third quarter of 2020, compared to 6.6 percent growth in the corresponding quarter of 2019, defying the impact of the coronavirus pandemic.