Inside Politics

Industrialists raise concerns over unpredictable tax laws

Friday, August 14th, 2020 00:00 |

Lewis Njoka @LewisNjoka

Manufacturers have raised concerns over shrinking market due to unpredictable tax measures introduced in the Finance Act 2020 unpredictable tax measures making industry uncompetitive and derogated EAC Common External Tariff (CET) regime risks hampering post-pandemic recovery efforts.

Speaking during a webinar yesterday, Kenya Association of Manufacturers (KAM) chief executive, Phyllis Wakiaga, said while a healthy manufacturing sector is a prerequisite for the growth and development of our country, some tax measures in at the expense of previous tax incentives gobbling up expected benefits.

She singled out the minimum tax and adjustment for inflation under excise tax as one of the tax measures that could derail the post-pandemic recovery.

“These tax measures include the introduction of the minimum tax which creates a disincentive for enterprises to venture into risk.

The timing is also very unfortunate because it happened within the background of Covid-19 pandemic,” said Wakiaga.

“The other issue we have noted is the adjustment for inflation under the excise duty act 2015.

Affordability is still paramount for consumers considering there is still a lot of reduction in the disposable income during this period and any increases in the excise duty in the coming fiscal years will simply lead to increase in consumer prices on excisable goods,” she added.

Institute of Economic Affairs CEO, Kwame Owino said tax systems are getting more complex, negating the goals to expand market access. 

He said there is a need to simplify taxation laws, reduce the administrative burden of Kenya’s tax code and finalise the review of the CET to promote competitiveness of local industries.

Wakiaga called on the government to create a more predictable excise duty regime, saying increasing excise duty on goods such as alcohol and soft beverages could lead to higher rates of illicit trade within the country.

Revenue collection

The Finance Act 2020 was signed into law in June and sought to increase revenue collection and cushion Kenyans from the adverse effects of the Covid-19 pandemic.

Speaking at the same forum, Director of Industries in the Ministry of Industrialisation, Stephen Odua, said the government will prioritise six sectors in its post-Covid rebound strategy for the manufacturing sector.

“We recognise that certain sectors are thriving and have indeed grown since the onset of the pandemic.

To support economic rebound, we have assessed the sectors and intend to prioritise pharmaceuticals and medical supplies, consumer electronics, textiles and apparel, agro-industries, automotive sector and the circular economy,” said Odua.

“Covid-19 has brought about the realisation that we need to shorten our supply chains and engage in the more local manufacture of goods that have demand in the country and in the region,” he added.

He said other sectors have been supported through the preferential procurement master roll Number 1 of 2020, released on July 8, which listed 334 locally produced goods that will be prioritised over imports in government purchases.

Odua called on the manufacturers of the 334 products to ensure they have enough products to meet government demand.

As of May 1, Kenya’s manufacturing sector had lost over 30,000 formal jobs with 80 per cent of the remaining jobs rendered vulnerable due to the Covid-19 pandemic.

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