Kenya Revenue Authority’s plan to compute taxes item by item requires major human resources and logistical investment, which the taxman should be ready to address besides potential bottlenecks at border points.
The decision targets small traders who import merchandise in a pool and pay taxes per kilo – which at the moment attracts a duty of Sh200 per kilo for air cargo or Sh2.2 million for a 40-foot container brought in through the sea.
Consolidators are charging traders Sh896 ($7) for a kilo of cargo transported by the air and Sh640 ($5) shipped by sea.
The taxman will now unbundle the goods with individual traders expected to pay taxes for each item imported.
It opens up the merchandise to import duties, value-added taxes, excise duty, import declaration levy and Railway Development Levy.
Small traders could now start paying import duty ranging from zero percent for raw materials to 10 percent for intermediate goods and 25 percent for finished products.
The bulk of small traders import finished products from China and Dubai, which means they will be slapped with a higher tariff of 25 percent.
The taxman says the change will result in more revenue collection besides fighting tax evasion. The aims are noble but the KRA must be ready to do whatever it takes to avoid unintended consequences hurting the free flow of trade.
Going through the imports item by item will require a huge increase in manpower to fast-track the process of clearing the goods. Anything less and there will be chaos at the ports.
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Note: The results are not exact but very close to the actual.
