The Star (Kenya)

Re­view taxes to cush­ion lo­cal in­dus­tries, state told

- Business · Value Added Tax · Taxes · Consumer Goods · KPMG Corporate Finance

MARTIN MWITA / The gov­ern­ment has been urged to re­view a num­ber of taxes to save lo­cal in­dus­tries from shut­ting down due to the im­pact of Covid-19 on their busi­nesses.

Ma­jor­ity of man­u­fac­tur­ers in the coun­try are op­er­at­ing be­low 50 per cent ca­pac­ity dur­ing the Covid-19 pe­riod, a sur­vey has shown and this cou­pled with a myr­iad of taxes threaten to crip­ple their op­er­a­tions.

The sur­vey by the Kenya As­so­ci­a­tion of Man­u­fac­tur­ers (KAM) and au­dit firm KPMG in­di­cates 53 per cent are op­er­at­ing be­low the mark, com­pared to a eight per cent be­fore Covid hit the coun­try.

The huge dif­fer­ence has been at­trib­uted to the tem­po­rary shut­down of pro­duc­tion plants or re­duc­tion in op­er­a­tional ca­pac­ity given the re­duced de­mand for goods and ser­vices dur­ing the cri­sis.

Lack of pro­cure­ment of lo­cally man­u­fac­tured prod­ucts by the gov­ern­ment and, in some cases, pref­er­ence for im­ported prod­ucts, re­mains a ma­jor chal­lenge, ac­cord­ing to the sur­vey. Un­pre­dictable poli­cies from the gov­ern­ment, par­tic­u­larly on tax­a­tion in the Tax Laws Amend­ment Act 2020 and the Fi­nance Act 2020, is yet an­other con­cern for man­u­fac­tur­ers, who have called for a re­view. Th­ese in­clude the min­i­mum tax and 14 per cent VAT on plant and ma­chin­ery. In­dus­try play­ers are also con­cerned about the stag­ger­ing of the in­vest­ment de­duc­tion, re­moval of phar­ma­ceu­ti­cal prod­ucts from VAT zero rate sta­tus to VAT ex­emp­tion, and with­drawal of the elec­tric­ity re­bate pro­gram, among oth­ers. “Man­u­fac­tur­ers are still fac­ing low do­mes­tic de­mand for their prod­ucts and re­duced risk ap­petite of com­mer­cial banks to of­fer credit to man­u­fac­tur­ers,” KAM, led by CEO Phyl­lis Waki­aga has noted. There is also slow re­sponse from reg­u­la­tory agen­cies in ap­prov­ing in­no­va­tions from lo­cal man­u­fac­tur­ers, de­spite the pandemic bring­ing out a num­ber of op­por­tu­ni­ties.

For in­stance, there is lack of stan­dards for med­i­cal ven­ti­la­tors which has hin­dered com­mer­cial­i­sa­tion of in­no­va­tions, and un­der­mined man­u­fac­tur­ers’ ef­forts to di­ver­sify pro­duc­tion. Fur­ther, the slow im­ple­men­ta­tion of in­ter­ven­tions al­ready pro­nounced by the gov­ern­ment, such as op­er­a­tional­i­sa­tion of the Buy-kenya- Build-kenya strat­egy and the SME credit guar­an­tee scheme, is wor­ry­ing lo­cal play­ers.

There is “un­level play­ing field be­tween lo­cally man­u­fac­tured goods and im­ported ones,” the sur­vey re­leased on Wed­nes­day notes.

?? /ENOS TECHE ?? Kenya As­so­ci­a­tion of Man­u­fac­tur­ers CEO Phyl­lis Waki­aga
/ENOS TECHE Kenya As­so­ci­a­tion of Man­u­fac­tur­ers CEO Phyl­lis Waki­aga

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