Economy

Kenyan MPs want bigger say on EAC import tax decisions

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Cargo trucks wait to be cleared at the One Stop Border Post in Lunga Lunga, Kwale County on June 21, 2022. PHOTO | WACHIRA MWANGI | NMG

Kenyan lawmakers now want a bigger role in the country’s tax decisions on goods entering the East African Community (EAC) bloc to protect traders against arbitrary changes.

The National Assembly’s Committee on Finance and National Planning says decisions on taxes on imported items should be subjected to public participation.

“The current practice means that whenever an amendment or application for a stay of execution is being canvassed parliamentary approval is never sought and as a result, there are cases of misalignment of tax laws as enacted by the Parliament,” it said in a report on the proposed National Tax Policy (NTP).

Read: Kenyan car buyers hit by 35pc import duty in EAC deal

Application of stay is made by a member state to suspend the prevailing common external tariff (CET) for the eight members of the EAC. A CET is a tax applied to imported goods by a group of countries that have formed a customs union. Kenya is one of the members of the EAC where customs management is governed by the East Africa Customs Management Act, of 2004.

Amendment or application for stay of provision within the EACMA Act is done through the Council of Ministers an organ of EAC as provided in East Africa Customs Management Protocol.

“Therefore, the NTP under Section 4.8 be amended to provide that, any amendment to the East Africa Customs Management Act or customs administration in general should undergo public participation and Parliamentary approval, prior to the government making proposals to the EAC and upon enactment, the regulations should also undergo Parliamentary approval as per the Statutory Instruments Act,” added the report of the Finance Committee headed by Molo MP Kimani Kuria.

Kennedy Manyala, an economics lecturer at the University of Nairobi, said such a decision was long overdue.

“In a country like Tanzania, those things follow all the due process as other national policies so that stakeholders are never ambushed,” said Dr Manyala.

Kenyans are in the dark on the existence of such proposals as there is nowhere they are subjected to public participation, according to Mr Robert Waruiru, a partner at Ichiban Tax & Business Advisory LLP.

“What Kimani Kuria was suggesting is that all of us are being caught unawares,” noted Mr Waruiru, adding that despite the custom changes for the current financial year coming into effect on July 1 it was not until July that the gazette notice became available to the public.

EACMA is supreme to all local laws relating to customs. The decision-making body under the protocol is the Council of Ministers, which makes laws for the entire trading bloc.

In the current Financial Year ending June next year, for example, Kenyan car buyers were hit by a 35 percent import duty after the EAC Council of Ministers approved an application by the Kenyan Finance minister to raise duty on motor vehicles under the CET.

Kenya’s import duty for cars had been at 25 percent, higher than the seven-country trade bloc’s CET of 10 percent.

Read: Textiles in tough times as EAC proposes top taxes

The adjustment resulted in double-digit increases in the prices of imported cars including those carrying 10 or more passengers, station wagons, and racing cars among others.

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