Kenya risks losing business to neighboring countries including Uganda, Tanzania, and Rwanda due to differences in excise duties on plastic products proposed in the Finance Bill 2024.
According to industry stakeholders, Uganda, Tanzania, and Rwanda have zero-rated excise duties for plastic products, while Kenya’s proposed excise duty on locally produced plastics could make it less competitive.
Kimani Kuria, the Chairperson of the National Assembly Departmental Committee on Finance and National Planning, emphasized the importance of transforming Kenya into a manufacturing hub rather than just a trading nation.
The Molo Member of Parliament made this assurance during discussions with stakeholders on the Finance Bill, 2024.
“I want to assure you that we have all intentions to protect our manufacturers. We want to make Kenya a manufacturing country rather than a trading one,” he noted.
Coca Cola Warning over Finance Bill Proposals
Stakeholders, including Coca-Cola Beverages Africa, expressed concerns that the new excise duty on locally produced plastics could drive businesses to relocate to neighboring countries.
John Mwendwa, Public Affairs, Communications, and Sustainability Director at Coca-Cola warned that the additional cost burden on locally manufactured plastics would increase production costs and, consequently, the cost of goods.
“By imposing excise duty on locally produced plastics, this will increase the cost of production and thus increase the cost of goods that require use of plastic packaging,” Mwendwa said.
“Coupled with other proposed levies on plastic packaging, this will result in multiple taxation on the same product, further increasing the costs of businesses and consumers,” he added.
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Kuria reassured stakeholders that the committee would avoid adopting revenue measures that could harm the local manufacturing sector.
However, he acknowledged that removing the word “imported” from Section 4G of the Excise Duty Act would result in a 10 percent excise duty on all plastics, both local and imported, making local products less competitive.
Companies Proposals
Coca-Cola also urged lawmakers to scrap the proposed eco levy of Ksh.150 per kilogram on plastic packaging materials, arguing it would exacerbate inflation, reduce disposable income, and deter investment in Kenya.
The company also proposed exemptions for commercial and agricultural vehicles from the 2.5 percent car circulation levy and suggested lowering the rate to one percent.
Tile & Carpet Centre Limited called for an exemption on white cement from excise duty, noting the absence of local producers within the East African Community (EAC).
They also pleaded for the removal of a 3 percent export and investment promotion levy on sanitary fixtures due to limited local manufacturing capacity.
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Technology Service Providers of Kenya (TESPOK) and Wananchi Group raised concerns over the proposed increase in excise duty on telephone, internet, and data services to 20 percent, advocating for a reduction to 10 percent to support connectivity and growth in ICT services.
The committee members called stakeholders to have these engagements even after the approval of the finance bill in order to monitor economic impact.
“Do not just engage with us during the consideration of the Finance Bill. Let us engage regularly to assess the impact of the approved law so it can inform how we approach the next Finance Bill”, Umul-Kheir Kassim urged.
To date, the Committee has engaged with 105 organized groups, with 71 more set to have their submissions reviewed.
Public hearings are scheduled to continue, including a session at the Kenyatta International Convention Center (KICC) on Monday, June 10, 2024.
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