Imported goods will be cheaper than locally manufactured ones- KAM chair on impact of Finance Bill 2024

Mwangi, who appeared on Citizen TV's The Explainer Show on Tuesday, stated that the Bill will cripple the sector due to many of the proposed levies, which will affect various sections such as raw materials and production services.

Despite stating that manufacturers account for the majority of jobs created in the country and revenue collection, Mwangi criticised the government for imposing taxes on raw materials and financial services that drive production, claiming that the move would discourage investment in the country.

He opined that though the government was aiming at increasing the revenue collection, it ought to prioritise encouraging production so that it increases the tax base.

“The proposal in the Act is to tax and not to encourage production. Some of the decisions in the Bill, there is nothing that encourages production-increased production; a lot of the proposals are actually putting levies, taxes and fees on raw materials that are supposed to produce which slows down production,” he said.

“Do you tax ab-nitio or do you encourage production so that you can tax more? That is the only difference we have.”

According to the KMA CEO, the Finance Act 2024 will make the country unpopular with external markets for investment and trade in East Africa and the continent as a whole, and its products will be less competitive due to high production costs.

Citing paper exports in 2023, which he claims collapsed as a result of the Finance Bill 2023, he goes on to say that the impact on the nation will be favourable to imported goods over manufactured goods.

“We don’t operate in a vacuum; Kenya operates within EAC common markets eg COMESA, not Africa continental free trade areas. Those frameworks determine how we make decisions. If you add levies and taxes on raw materials, what it does is make your goods less competitive than your neighbours; whereas we were exporting to these countries, now we are importing because imported goods will be cheaper than those manufactured locally,’ he said.

“In Finance Act 2023, we were exporters of paper and packaging materials from Kenya; but by just adding a 10% export investment and promotion levy, we actually now importers, our exports have collapsed.”

Mwangi advised the government to conduct an impact assessment on the Finance Act 2023 before moving forward with 2024.

The 2024 Finance Bill, sponsored by Molo MP Kimani Kuria, proposes new levies such as a motor vehicle circulation tax, VAT on bread, and increased excise taxes on spirits, cigarettes, M-Pesa, airtime, and bank transfers, among others.

It seeks to amend the Income Tax Act (Cap.470), the Value Added Tax Act (Cap.476), the Excise Duty Act (Cap. 472), the Tax Procedures Act (Cap. 469B), and the Miscellaneous Fees and Levies Act (Cap.469C).

Others include the Affordable Housing Act (No. 4 of 2024), the Industrial Training Act (Cap. 237), the Data Protection Act (Cap. 411C), the Public Finance Management Act (Cap. 412), and the Kenya Revenue Authority Act (Cap. 469).