Kenya will introduce 0.2pc tax on imported goods to finance AU military operations

Kenya has introduced a fresh levy on imports as part of African Union (AU) efforts to raise funds for its troops operations without undergoing donor scrutiny blamed for current financing hitches.

Treasury secretary Henry Rotich says 0.2 per cent will be collected on every home-bound import for the AU peace fund. 

At least Sh3.2 billion would be raised on the Sh1.577 trillion that Kenya imported last year if that levy were in force over the period.

The new proposed levy in the Miscellaneous Fees and Levies Bill, 2016, is however not expected to raise the overall price of goods as Treasury moves to cut import declaration fee (IDF) from 2.5 per cent to 1.8 per cent.

“We have had discussions with importers and stakeholders and we would like to progressively reduce the import declaration fee,” Mr Rotich told National Assembly’s Trade, Finance and Planning committee on Tuesday.

“There will be no increase on cost of imports. The effect of the new levy will be zero. There will be no overall impact on taxation of imports.”

The AU has stationed its soldiers is West Africa and other troubled spots of the continent. It has 22,000 soldiers in Somalia, about 4,000 of them being Kenyans who are funded by the European Union (EU). It has also indicated plans to send troops to South Sudan.

The AU Summit held in Kigali last month approved a 0.2 per cent levy on imports to fund AU operations and create a Peace Fund.

The move is seen as an attempt by African states to sidestep the strict accounting rules that donors place on their funds, which has seen the EU delay allowances payment for troops fighting Al-shabaab in Somali.

READ: EU delays Army refunds for fighting Al-Shabaab

The business community has previously criticised levies on imports saying it blunts competitiveness of their products. Kenya’s manufacturing sector relies heavily on imported raw materials and inputs for its production.

The manufacturing sector has been at loggerheads with the Treasury over the 1.5 per cent railway development levy imposed on imports from June 2013 aimed at raising Sh20 billion annually for the Mombasa-Nairobi line.

“So we decided we will take it (AU levy) from the IDF and create a new fund as provided under the Public Financial Management Act,” Mr Rotich said. “Therefore, IDF will be 1.8 per cent as 0.2 per cent goes to AU peace fund.”

African forces in Somalia have in the meantime has released a timetable showing they intend to complete their mandate and start withdrawing from troubled Horn of Africa country in October 2018.

The African Union Mission (Amisom) says the two-year period will give them ample time for setting up necessary facilities for the handover to the Somali forces.

The team however maintains it has to leave behind a stable country after the Somalia government soldiers take control of the territories occupied by Al-Shabaab.