The Kenya Revenue Authority (KRA) has increased the customs benchmark for containerised cargo from Ksh 2.5 million to Ksh 3.2 million in what is expected to seal revenue leaks associated with undervaluation of imported goods.
KRA says the containerized cargo arrangement which has been in operation for the last six years has been crucial and legitimate avenue for small traders to import goods by combining shipments in a single container, reducing the cost of international trade.
According to KRA Commissioner for Customs and Border Control Dr Lilian Nyawanda, the arrangement with traders has been exploited to facilitate customs non-compliance, including undervaluation, under-declaration, misdescription, misclassification and concealment of high-value goods.
This has contributed to revenue leakage and distort competition by allowing non-compliant businesses to bring goods into the country at artificially low costs.
“This is not about targeting small traders. It is about creating a level playing field where businesses compete fairly. A trader who declares goods correctly and pays the taxes due should
not be disadvantaged by another trader who gains an unfair cost advantage through undervaluation, under-declaration or concealment of goods,” said Nyawanda.
The authority says the new contanerrised cargo benchmark is a minimum reference point and not a flat valuation applicable to every container. As such, importers who will have the actual value of their goods exceed the benchmark, are required to make accurate declarations and the goods will be subjected to the applicable customs valuation and tariff treatment.
“The Ksh 3.2 million benchmark does not mean that every container is valued at Ksh 3.2 million. If the actual value of the goods is higher, that value must be declared and the correct taxes paid.
The benchmark is intended to strengthen valuation controls, not to provide a ceiling for the value of imported goods,” she added.
The authority says most affected by undervaluation are high-value electronics such as smartphones which may be declared as a lower-value model in an attempt to reduce the customs value and taxes payable.
KRA has also raised concern that some larger importers who nowadays seek to use consolidation arrangements to reduce their tax obligations, creating an unhealthy business environment for
compliant traders.
“Fair competition requires businesses to compete on the basis of efficiency, quality and innovation, rather than through avoidance of taxes. Protecting the integrity of the customs system
also protects compliant businesses and supports local manufacturing,” Nyawanda noted.
Traders who opt to use the cargo consolidation arrangements to import goods are further being advised to ensure they meet their applicable domestic tax obligations upon sale of the goods.
