•The taxes came into at the beginning of the new financial year 2021/22, on July 1, after the President assented to the new Finance Act.
•KAM has warned that high taxes significantly threatens the ‘Made in Kenya’ goal, and gives an upper hand to cheaper imports from other countries.
Manufacturers have faulted nine new taxes and levies introduced by the government in the current financial year, warning they will hurt industries in the country.
This, even as growth and contribution of the manufacturing sector stagnate mainly on the high cost of doing business in the country, amid competition from cheaper imports mainly from China.
Early this year the Finance Bill 2021, which contained a raft of tax measures with substantial impact on various sections of the economy, was proposed after extensive engagement with stakeholders.
However, in the new Finance Act 2021, tax provisions that were not subject to public participation were introduced, the Kenya Association of Manufacturer (KAM) notes.
“The public participation process is a key principle in public financial management, and this move has denied affected taxpayers an opportunity to interrogate the impact of these measures on their cost of living and doing business,” KAM chairman Mucai Kunyiha said in a statement.
KAM is particularly concerned about the imposition of 10 per cent excise tax on articles of plastics, 10 per cent excise tax on imported resins and 10 per cent excise tax on super absorbent polymer (SAP), used in the manufacture of baby diapers.
The government has also imposed a Sh200 per kg excise tax on locally produced white chocolate, excise tax on imported fertilized eggs for incubation or hatching and and the 16 per cent VAT on the supply of liquefied petroleum gas (LPG), including propane.
Further, the government is taking 16 per cent VAT from clean and improved cook stoves.
It has also imposed higher specific import duties for some categories of timber products and provision to limit interest to be deducted to a maximum of 30 per cent of Earnings Before Interest Tax, Depreciation and Amortization.
“Not only are the above taxes counterproductive, as they are in complete contradiction of the 'Do No Harm' approach to local businesses on the recovery track, but their domino effect has acute consequences across all sectors and their value chains,” Kunyiha said.
This includes infant industries in the food and beverage sector, dairy, soft drinks, distribution businesses, retailers and the consumers.
Also adversely affected are emerging segments of manufacturing such as baby diapers and chocolates, of which Kenya has previously been a net importer.
The taxes came into at the beginning of the new financial year 2021/22, on July 1, after the President assented to the new Finance Act.
KAM says manufacturers were uninformed and unprepared to start implementing the excise regime and, in many cases, the enforcement of the provisions remains unclear.
The Kenya Revenue Authority I-tax system was also not prepared for some of these changes, KAM adds.
According to Kunyiha, manufacturers cannot, for example, register to collect excise on plastic bottles, forestalling production and sales and severely diminishing efforts to steer the country from the pandemic effects.
Taxation has become a major area of frustration for businesses in the country as large segments of the Kenyan economy are invariably pushed into the informal sector, the manufacturer's lobby says.
“The association calls for the immediate suspension of these provisions and urges for a more comprehensive engagement with industry, to cushion citizens from further loss of their purchasing power of basic commodities,” said Kunyiha.
KAM has warned that high taxes significantly threatens the ‘Made in Kenya’ goal, and gives an upper hand to cheaper imports from other countries.
The local manufacturing sector (which is part of President Uhuru’s ‘Big Four Agenda), is still struggling through the Covid-19 pandemic effects, and continues to lose its competitiveness in both local and export markets.