KAM raises red flag over punitive tax measures in finance bill

The Kenya Association of Manufacturers has raised concerns about the proposed amendments in the Finance Bill, particularly the increase in the Import Declaration Fee from 2.5% to 3%. According to the association, this hike in fees will inflate the cost of raw materials, potentially hindering the manufacturing sector's ability to add value to products. CNBC Africa spoke to Job Wanjohi, Head of Policy Research and Advocacy at the Kenya Association of Manufacturers, to delve deeper into the anticipated impacts of the proposed law. The interview highlighted various aspects of the Finance Bill 2024, emphasizing the need for a balanced approach that promotes economic growth while safeguarding the interests of manufacturers and consumers alike. Wanjohi expressed his disappointment with the current version of the Finance Bill, stating that it leans more towards revenue generation than fostering economic development. He underscored the importance of an export-led growth strategy, reduction of regulatory burdens, and improvement of living standards for Kenyan citizens. While acknowledging some positive aspects of the bill, such as exemptions for certain manufacturing inputs and repellents, Wanjohi also flagged several concerns, particularly regarding punitive tax measures that could escalate production costs. One of the key issues raised was the Export Promotion Investment Levy, which has reportedly had adverse effects on sectors like cement manufacturing, paper and paperboard production, and the metal industry. Wanjohi argued that these levies should align with the common external tariff structure to ensure fair treatment of raw materials versus finished goods. Similarly, the introduction of the Eco Levy, intended to promote environmental conservation, was criticized for duplicating existing fees and potentially burdening manufacturers with additional costs. Moreover, the proposed tariffs on essential items like diapers, batteries, edible oils, and plastic materials raised concerns about affordability and sustainability for ordinary consumers. Wanjohi warned that such levies could lead to a significant increase in production costs, which may ultimately be passed on to end-users, further straining household budgets. In response to the government's rationale for raising domestic revenue to reduce borrowing, Wanjohi highlighted the need for tax reforms that broaden the tax base and stimulate economic growth. He cautioned against over-taxing a limited number of taxpayers and emphasized the importance of restructuring the economy to foster job creation and drive private sector expansion. Wanjohi advocated for a holistic approach that balances revenue generation with long-term economic sustainability. Looking ahead, the Kenya Association of Manufacturers is engaging in public participation efforts to influence the final version of the Finance Bill. The association is pushing for adherence to the principles outlined in the draft National Taxation Policy, which prioritize export promotion, economic development, and local production support. Wanjohi emphasized the urgency of aligning the bill with these guiding principles to enhance Kenya's global competitiveness, boost export value addition, and foster the growth of small and medium enterprises. As stakeholders await further deliberations on the Finance Bill, the outcome of the public consultation process will play a critical role in shaping the future of Kenya's manufacturing sector and overall economic landscape.