Cheap, locally assembled motorcycles timed out again
Wednesday June 21 2017
In 2013, Honda Motors Company Ltd established a motorcycle production plant and sales subsidiary in Kenya while Dutch firm Kibo also started production of the Kibo 150 brand of motorcycles for Kenyan riders. PHOTO FILE | NATION
East African countries have extended the plan to exclude imported motorcycle parts from taxation by another year, starting from December 2016, due to lack of funds to pay off consultants appointed to do the job.
This is the second time the process, which aims to lower the cost of production of motor cycles and promote localisation of their assembly in the region has been deferred.
In 2015, the EAC’s efforts to accomplish the task were also frustrated by lack of funds.
The team of experts drawn from each member state was required to develop a list of what should be excluded and included in the completely knocked down (CKD) kits for motorcycle assembly under the duty remission schedule, and develop regulations to govern this by December 2016.
READ: EAC member states reinstate tax waiver on motorcycle parts
But the EAC Secretariat said the work was not completed owing to financial difficulties.
“The process of developing the list will be concluded by end of November 2017,” said the EAC.
As a result, the EAC Ministers of Finance extended the stay of application contained in the Legal Notice No. EAC/39/2013 of June 30, 2013, on duty remission for motorcycle assembly by one more year.
Through the gazette notice, the EAC abolished a 15 per cent tax waiver on imported motorcycle parts previously enjoyed by regional assemblers and introduced full duty of 25 per cent on all parts imported from outside the EAC bloc.
READ: Promising future for motorcycle assembly in East Africa
Lacking capacity
The regulation, however, imposed a condition that manufacturers would continue enjoying the 15 per cent waiver only if they sourced motorcycle parts from any of the EAC member states and avoided importing CKDs from outside the bloc.
The notice singled out various CKD parts to be obtained within the EAC such as the main frame, suspension, seat frame, mudguard, wheel rim, brake gear and exhaust pipe.
However the manufacturers want the Secretariat to rescind its decision, arguing that the region lacks the capacity to produce the kits and subjecting imported parts to higher taxation will hurt the business.
The experts are expected to identify which imported motorcycle parts could be excluded from taxation in order to lower the cost of production and encourage industrialisation in the region.
In 2013, Honda Motors Company Ltd established a motorcycle production plant and sales subsidiary in Kenya while Dutch firm Kibo also started production of the Kibo 150 brand of motorcycles for Kenyan riders.