Manufacturers propose higher taxes on imports

Tuesday May 10 2022
Beauty products.

Among import items that will attract the highest tax are haircare products, plastics, paper and furniture. PHOTO | FILE


Importers of beauty products, textiles and motor vehicles face higher taxes should the East African Community settle on a unified policy on the fourth band of the Common External Tariff (CET).

The maximum CET rate has been 25 percent but has risen to 35 percent after conclusion of negotiations to adopt the fourth band are ongoing.

The CET is considered an important instrument of EAC Customs Union Protocol as it determines the tax paid on imports from outside the region. Under the current CET, raw materials attract zero percent tax, intermediate goods 10 percent and finished products attract 25 percent levy.

“Among the EAC partner states, it is only Uganda that has proposed a 35 percent tariff. Kenya and Tanzania propose the maximum rate to be 33 percent, while Rwanda and Burundi propose 30 percent,” said Phyllis Wakiaga, chief executive of the Kenya Association of Manufacturers.

“We as manufacturers have already agreed on a proposal by the Kenyan private sector of 35 percent as the fourth CET tariff band,” she added.

Most of the products considered for a maximum CET rate (the fourth band) are under the EAC priority value chains as provided for in the EAC Industrialisation Policy (2012-2032). They include textiles, iron, steel and motor vehicles.


“Textiles and textile articles, footwear, headgear, artificial flowers and articles of human hair are among the items listed under the fourth band,” Wakiaga explained.

Driving industrialisation

Manufacturers want higher tariffs to bar importation of items that could otherwise be made locally.

The Kenya private sector umbrella body argues that the 35 percent CET rate will offer the protection the region requires to drive regional value chains and industrialisation.

“The private sector in the EAC has proposed 35 percent tariff rate because it provides an adequate tariff differential which is required to encourage industrial development in the EAC region,” said John Kalisa, CEO, East African Business Council.

“Some of the products have a long value chain and face unfair competition from cheap imports from Asian countries hence need higher rates to safeguard their production.”

But a section of beauty products importers are opposed to more tax arguing it will run them out of business.

“It will mean that we now have to change our strategy and re-invent and use local substitutes, which are likely to be even more expensive. This is likely to drive the local beauty industry out of business and benefit countries such as Nigeria, which are more established in the business,” said Jayne Okoth of the Rapenzel Hair Care.

By the end of 2022, the African beauty market is expected to be worth more than $14 billion.

The majority of the market and growth is located in sub-Saharan Africa, with Nigeria and South Africa leading the way. Kenya’s market totalled more than $320 million by 2021 while Nigeria’s is valued at $3.4 billion.

“It is not good news for traders of second hand clothes bearing in mind that we haven’t recovered from the effects of the Covid-19 pandemic,” said Teresiah Wairimu, chairperson, Mitumba Association of Kenya. See also page 6