The Star (Kenya)
Review taxes to cushion local industries, state told
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.