The Kenyan Manufacturers Association (KAM) has warned that the country’s manufacturing capacity is threatened by new taxes introduced under the 2021 Finance Act.
KAM chairman Mucai Kunyiha said manufacturers have started to feel the effects of tax measures, which resulted in a sharp increase in production costs that is expected to affect key goods produced in the country.
“These additions have dealt a significant negative blow to the profits envisaged by many companies in the bill and have had far-reaching debilitating effects on key sectors of the industry. For example, an excise tax was introduced on a variety of raw materials, effectively increasing manufacturing costs and end-user prices, ”said Mucai Kunyiha, chairman of KAM.
Kunyiha says some of the law’s provisions were not subject to statutory public participation, which denied taxpayers the opportunity to question the impact of the new tax measures that went into effect July 1, 2021.
It is imperative for the government to understand that including these taxes puts the Made in Kenya goal at risk and gives cheaper imports from other countries the upper hand. In addition, the local manufacturing sector, which is still grappling with the worst effects of the pandemic, continues to lose competitiveness in both local and export markets, ”Mucai argued.
Taxes that KAM says will negatively impact the country’s manufacturing agenda include the 10% excise duty on plastic items, imported resins, and superabsorbent polymer (SAP), which is used in the manufacture of baby diapers.
The tax is also against the imposition of Ksh. 200 per kg of excise duty on locally produced white chocolate and levying an excise duty on imported fertilized eggs for hatching / hatching.
Liquefied petroleum gas (LPG) including propane is also subject to VAT of 16% according to the finance law.
A VAT of 16% is also charged for clean and improved stoves.
Mucai added, “It is particularly worrying that these taxes went into effect on July 1, 2021, two days after the president approved the new finance bill. Manufacturers were completely ignorant and unprepared to start implementing the excise regime and in many cases enforcement of the regulations remains unclear. “
KAM has also spoken out against the requirement to limit the interest deduction to a maximum of 30% of earnings before interest, depreciation and amortization.
The KAM is now calling on the Ministry of Finance and the National Assembly to suspend the aforementioned provisions in order to allow greater cooperation with industry to cushion consumers from higher goods prices.