Kenya will retaliate on excise tax that Uganda is charging on pharmaceutical, beer and spirits exports to that country if Kampala will not abolish the duty that it levies on Kenyan products.
Trade Principal Secretary Chris Kiptoo on Wednesday said they had a discussion with Uganda in December during a trade mission in Kampala and it was agreed that Uganda should abolish the 13 percent excise duty on Kenya’s pharmaceutical, beer and spirits.
Dr Kiptoo said there was need to harmonise taxes to create a level playing field for both countries.
“Uganda has given an undertaking that it will abolish these taxes, but if they do not, then we have no alternative but to reciprocate,” Dr Kiptoo told the Business Daily.
The PS pointed out that the move, which is discriminative and goes against the spirit of the East African Community (EAC) Protocol, is hurting local manufacturing.
Kenya has been caught up in various tax issues with its EAC partners especially Uganda and Tanzania, which have been levying duty on some of the goods destined to these countries.
For instance, Tanzania has imposed veterinary levy on Kenyan milk while Uganda is also taxing poultry products (18 percent VAT) that Kenya exports to Kampala. This has made it hard for Kenyan goods to compete favourably in these markets.
The state also says is considering levying duty on poultry products coming in from Uganda. Uganda exports a lot of eggs to Kenya with a significant share coming in outside of the designated customs points.
However, the government recently heightened surveillance at the border in a move that cut down on illegal imports. The crackdown has so far seen the price of a crate of eggs shoot rise to Sh350 from Sh280 previously.
The Ministry of Trade has already proposed a 16 percent duty on milk that is coming in from Uganda as it seeks to protect dairy farmers who have raised concerns over the influx of cheap Ugandan milk that has seen the price of the commodity plummet to Sh19 a litre from Sh37 the same time last year.
Data presented to parliament recently shows that milk imported from EAC, with the most volumes coming from Uganda, hit 110.7 million litres between January and September from three million litres in 2016.