New taxes threaten ‘Made In Kenya’ goal, KAM warns

The Kenya Association of Manufacturers (KAM) has warned that the country’s manufacturing capacity is under threat from new taxes introduced under the Finance Act 2021.
KAM Chairman Mucai Kunyiha has said manufacturers have begun feeling effect of the tax measures which seen a sharp rise in the cost of production which is expected to have an impact on key goods produced in the country.
“These new additions have dealt a significantly negative blow to the gains foreseen by many businesses in the Bill and have a far-reaching debilitating impact on key sectors of industry. For instance, excise tax has been introduced on a variety of raw materials, effectively increasing the cost of manufacturing and final consumer prices,” said Mucai Kunyiha, KAM Chairman.
Kunyiha says some of the provisions in the act were not subjected to public participation as required by law which denied taxpayers an opportunity to interrogate the impact of the new tax measures which came into force on July 1, 2021.
“It is imperative that the Government understands that the inclusion of these taxes significantly threatens the Made in Kenya goal, and gives an upper hand to cheaper imports from other countries. Additionally, the local manufacturing sector, which is still struggling through the worst of the pandemic effects, continues to lose its competitiveness in both local and export markets,” argued Mucai.
Among the taxes KAM says will negatively impact the country’s manufacturing agenda include the 10% excise tax on articles of plastics, imported resins as well as super absorbent polymer (SAP) used in the manufacture of baby diapers.
Tax is also against the imposition of Ksh. 200 per kg excise tax on locally produced white chocolate and imposition of excise tax on imported fertilized eggs for incubation/hatching.
Under the Finance Act, liquefied petroleum gas (LPG) including propane are also subjected to a 16% VAT.
Clean and improved cook stoves also attract VAT at the rate of 16%.
Mucai added, “It is particularly concerning that these taxes came into effect on 1st July 2021, two days after the President assented to the new Finance Act. Manufacturers were totally uninformed and unprepared to start implementing the excise regime and, in many cases, the enforcement of the provisions remains unclear.”
KAM has also argued against the provision to limit interest to be deducted to a maximum of 30% of Earnings Before Interest Tax, Depreciation and Amortization.
KAM is now calling on Treasury and the National Assembly to suspend the said provisions to allow for more comprehensive engagement with industry in order to cushion consumers from higher prices of goods.
  

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