Lovers of imported goods to pay more in bid to shield local firms
Kenyans with a penchant for imported goods are likely to pay more after the Treasury opted to increase tax on foreign products rather than slash duty on raw materials to boost local manufacturers’ competitiveness.
Principal Secretary Kamau Thugge has indicated that the Finance Bill 2018 will contain a wave of increases in duty on final goods in a protectionist policy aimed at discouraging the importation of products that can be made locally.
“It was agreed we leave the Railway Development Levy (RDL) and Import Declaration Fee (IDF) unchanged, but increase the (import) duty on final goods to protect local manufacturers of final goods,” Dr Thugge said in a text message, without disclosing specific goods targeted.
The planned rise in duty may set the stage for price increases on basic commodities such as wheat flour, vegetable oils and clothes, which are both imported and made locally, potentially eroding the purchasing power of households.
The Kenya Association of Manufacturers (KAM) had proposed a rise in the IDF on finished imported goods to 3.5 per cent of value of imports from 2.5 per cent presently and doubling of the RDL to three per cent.
The lobby was also rooting for zero-rating of the two import levies on raw materials and machinery to make local industries competitive by lowering the cost of making domestic products.
The Treasury has, however, decided to slap higher taxes on foreign finished goods and leave the import levies on industrial supplies unchanged to protect its ordinary revenue, projected at Sh1.74 trillion in next financial year from July.
The two levies – IDF and RDL – generated taxes of about Sh69 billion last year based on imports of Sh1.725 trillion. KAM chairperson Flora Mutahi has said failure to give incentives to manufacturers might derail President Uhuru Kenyatta’s industrialisation agenda, maintaining that the cost of production is about 12 per cent higher than global benchmark.
“Big Four is not a long-term project. The President wants results before he leaves. We thought we needed to have all the guns blazing at the same time because the manufacturing investment cycle is not an overnight thing,” she said.
“It is rather unfortunate (we didn’t get incentives) but, at least, it (is a disincentive to importers of final goods) is step forward rather than nothing and we will continue with consultations.”
Dr Thugge dismissed suggestions the Treasury was planning to increase the railway levy on finished imports to partly shoulder the cost of loan repayments. “No we are not (increasing RDL),” he said.