The Treasury and Industrialisation ministry are holding talks to remove Import Declaration Fee (IDF) and Railway Development Levy (RDL) on raw materials shipped in by manufacturing firms in “coming months”.
This will help support growth of domestic factories, especially those at infancy, Industrialisation secretary Adan Mohamed said.
He added the plan was part of wider policy changes in the short and medium term aimed at jump-starting the near-stalled Kenyan industry.
Mr Mohamed hinted the resultant revenue hole will be loaded onto finished goods, meaning importers of ready-made products could face increased RDL and IDF charges.
The Kenya Revenue Authority charges 2.5 percent of the value of consignment as IDF, while RDL –introduced on imports in 2013 to help repay the Standard Gauge Railway loans – is charged at 1.5 percent.
“A plan that we are working on with our colleagues in the Treasury is actually to charge zero IDF, zero RDL on raw materials initially to start with, and then we load that revenue shortfall on raw materials into finished goods,” Mr Mohamed said.
“That way we hope that goods that come into our country as readymade will be a bit more expensive.”
He spoke in Nairobi during the launch of Manufacturing Priority Agenda (MPA) 2018, which outlines immediate action plans needed to grow the sector’s contribution to the gross domestic product (GDP) to 15 percent in 2022 from 9.2 percent in 2016.
Manufacturers have for long been agitating for the two levies to be scrapped, arguing they were piling industrial input costs for firms, which then pass them onto consumers.