Kenya faces Sh10bn tax loss in Africa free trade

What you need to know:

Kenya which made a total tax collection of Sh1.5 trillion in the year to June last year will suffer the loss as a result of scrapping of tariffs.
The country charges import duty of 25 percent on finished goods and 10 percent on intermediate goods as long as they originate from outside the Comesa and East African Community.
Products classified as “sensitive” because of available local capacity however attract duty at higher rates between 35 and 100 percent.

Kenya is set to lose customs taxes totalling Sh10 billion or 0.6 percent of last year's government revenues once the Africa Continental Free Trade Area (AfCTA) takes effect this year in July, a newly released UN report shows.

The report produced jointly by the United Nations Economic Commission for Africa (UNECA) and Trademark East Africa (TMEA) however shows that East Africa as a whole will earn Sh180 billion in welfare gains and benefits as the successful implementation of free trade deal will create 2 million jobs.

Kenya which made a total tax collection of Sh1.5 trillion in the year to June last year will suffer the loss as a result of scrapping of tariffs currently charged on imports in effort to ease movement of goods on the continent.

The country charges import duty of 25 percent on finished goods and 10 percent on intermediate goods as long as they originate from outside the Comesa and East African Community. Products classified as “sensitive” because of available local capacity however attract duty at higher rates between 35 and 100 percent.

“There would be a small price to pay once AfCTA is effected as Kenya will lose an estimated tariff revenue loss of 3.2 percent, which is an equivalent of 0.6 percent of the total national revenue,” Dr Andrew Mold, the acting director of UNECA said in Nairobi on Thursday during the launch of the report.

The journey towards Continental Free Trade Area gained momentum in March 2018, when 44 nations signed up during the African Union Extra-Ordinary Session in Kigali, Rwanda.