In order to reduce various taxes, shippers in the East African region now want an element of the Import Declaration Fee (IDF) to go through state agencies.
This is happening at the same time as the National Treasury intends to raise the IDF payable on the customs value of imports from the current 2.5% to 3%, a move that local shippers and manufacturers claim will increase production costs.
Tanzania has a competitive advantage over its neighboring countries since they do not impose an import duty (IDF). Tanzania’s import levy is less than 2%.
The Kenya Bureau of Standards (Kebs), Kenya Trade Network Agency (KenTrade), and Kenya Plant Health Inspectorate Service (KEPHIS) will receive at least 70% of the IDF, according to a request made yesterday to Parliament by the Shippers Council of Eastern Africa (SCEA).
The Horticultural Crops Directorate, Agriculture and Food Authority, and Port Health are the others.
“Parliament can make amendments directing that 70 per cent of the IDF and which would total over Sh60 billion, be provided to trade facilitation agencies and thus save the industry from the various fees and changes imposed by the said agencies for their sustenance,” SCEA acting CEO Agayo Ogambi said.
According to him, this action will lessen the fees charged for imported goods that are not worth the services provided.
According to Ogambi, “If this is accepted and other measures taken, costs of doing business will be reduced and competitiveness enhanced.”
The Finance Bill, which is presently before Parliament, also emphasizes and suggests allocating 20% of total IDF collection to revenue enforcement initiatives or programmes, and 10% of total IDF collection to Kenya’s membership in the African Union and other international organizations.
The industry has suggested that IDF be lowered to tax exempt in order to promote the nation’s manufacturing and agribusiness, as well as raw materials, intermediaries, fertilizer, packaging materials, and equipment.
Due to Kenya’s continued status as a net importer, customs revenue ranks second for KRA behind domestic taxes. In 2022–2023 the taxman received Sh754.1 billion in revenue from customs taxes, which included IDF.
IDF ended the first half of 2023 at Sh23 billion, with an average of Sh45 billion every year.
The performance of customs taxes was somewhat impacted by the growth in exemptions and remissions, which increased by 39.7% due to special exemptions granted to rice, maize, sugar, and cooking oil, even though overall import values increased by 15.3%.
“These products account for 24.8 per cent of exemptions accorded in the Financial Year 2022-2023. The special exemptions were part of the government’s strategies to mitigate against adverse effects of drought and to reduce the cost of living,” KRA Commissioner General Humphrey Wattanga noted.
KenTrade is one of the state agencies that has drawn harsh criticism for adding new user fees to its platform, which are perceived as an extra expense for importers and exporters.
In an effort to generate money to meet its financial obligations, the State organization in charge of the National Electronic Single Window System—an automated platform that enables parties involved in trade and transportation to submit papers and request clearance—has implemented an array of levies.
With effect from May 20, KenTrade will charge new registration applicants a user fee of $50 (Sh6,463). The amount it charges is likewise comparable to the annual access price.
In addition to paying $10 (Sh1,292) every request, users who wish to ask for the lifting of a suspension must also pay a similar amount to apply for a unique consignment reference number on the system.
KenTrade further charges $80 (Sh10, 340) for notification of an upcoming consignment arrival or departure, $10 per transaction for import and export exemption applications, and $5 (Sh646) for the application of a domestic trade permit or license.
