Politics and policy
Taxman to lose Customs desk in planned model
Posted Thursday, June 14 2012 at 21:52
The Kenya Revenue Authority (KRA) will lose its Customs Department as the government adopts a new regional tax revenue management model aimed at improving trade flow.
Finance minister Njeru Githae said on Thursday KRA’s Customs Services department will be remodelled into an autonomous entity in line with the provisions of the East African Community Common Market Protocol that requires the creation of a seamless tax revenue management system.
“The Kenya Revenue Authority will be rationalised with a view of establishing the Customs Services as an autonomous entity,” he said in the Budget Speech in Parliament.
Partner states of the EAC are working to implement a seamless tax revenue management system where tax will be collected once at the point of entry. Imported goods will then be allowed to move up to the final destination without stopping at national border points for inspection.
EAC Heads of State in April endorsed the seamless tax management model, raising hopes for the formation of a regional Customs Authority.
It is estimated that the smooth flow of goods across national borders would save traders up to 15 per cent of transit cost occasioned by delays.
Since EAC launched its Customs Union in January 2010, disagreement over collection and sharing of revenue has frustrated efforts to establish a regional customs authority.
The regional taxman is expected to have a presence at key entry ports, taking charge of customs revenues currently accruing to national governments.
EAC member states Kenya, Uganda, Rwanda, Burundi and Tanzania are expected to devise a formula for the sharing of revenues accruing from levies and fees collected at external border points.
KRA would lose close to 35 per cent of its present annual collections even as member states propose that the revenues be spent on projects of regional interest.
Opposition to a regional customs authority has also come from the port of Mombasa, a key entry point, whose handlers the Kenya Ports Authority (KPA) maintain that extending the facility’s function to include collecting customs revenues will further delay the discharge of cargo given the current levels of congestion.
Mr Githae said the government would also carry out regulatory reforms to ensure all weighbridges are relocated to the port of Mombasa and the number police road blocks on key highways are reduced substantially to cut down on the cost of transaction associated with delays.