The National Treasury plans to hit locally manufactured pasta with the introduction of a 20 percent excise duty, a move that could affect the country’s competitiveness in making this foodstuff.
In the Finance Bill, 2023, the government is proposing to introduce the tax on both imported raw material for making pasta, known as Semolina, and finished pasta products such as noodles and spaghetti.
The government will be targeting a piece of the Sh4 billion that traders pay to import both raw materials and finished pasta.
The introduction of excise duty on Semolina, the raw material, is likely to raise the cost of producing pasta in Kenya should the National Assembly approve the proposals, with prices potentially rising by 25 percent from Sh147 for a 500 grammes Spaghetti to Sh184.
Rajan Shah, the chairman of the Kenya Association of Manufacturers (KAM), in a Linkedin article, said that slapping pasta and other locally manufactured products would reduce its competitiveness.
“I wonder why the government wants to increase taxes on local manufactured goods…affecting the only known local manufacturer who should be encouraged to build a bigger market including helping them to export to the region for balance of trade benefits for our country?” Mr Rajan posed.
Increased excise duty on pasta, critics, of the proposed tax measure argue, will also make locally-produced pasta uncompetitive compared to that made in Tanzania, the only other country in the East African Community (EAC) that makes its own pasta. Pasta in Tanzania does not attract any excise duty.
Currently, locally-produced pasta attracts a 16 percent value-added tax.
Cooked easily by boiling, pasta, which includes spaghetti and macaroni, has become a popular dish in fast-paced urban households.
In the Financial Year 2015/2016 the former Cabinet Secretary for National Treasury in his budget speech eliminated import duty on Semolina.
This gave impetus for the local investors to venture into this industry, which for long had been dominated by imports from countries such as Egypt, Turkey, Iran and the United Arab Emirates.
Official data shows that in 2021, Kenya imported Sh4 billion ($29.1 million) worth of pasta.
Imports of pasta hit a high of Sh5.5 billion ($40.3 million) in 2020, at the height of the Covid-19 pandemic, official data shows.
