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Kenya eyes new EAC tax measures to grow local industries

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Kenya on Thursday ramped up its growth plan for the year after EAC member states sanctioned new taxation measures, in an upbeat budget that vowed to protect local manufacturers from unfair competition.

The economy has been on a strict diet of austerity measures that curbed spending and lowered taxes in the wake of the coronavirus pandemic. The gloom has brought with it pay cuts and job losses and as a result local industries have been hit hard.

New move by the bloc now seeks to offer a lasting redemption package to the struggling industries after new import tax changes on the bloc’s Common External Tariff (CET) were announced last week and will take effect on July 1 following a ratification agreement signed during the Pre-Budget Consultations by members’ representatives.

The EAC Ministers have been holding the Pre-budget Consultations prior to reading the National budgets as a way of harmonizing fiscal measures in the region.

The new import duty measures include Duty Remission for Industrial Inputs, Stays of Application, and Amendments of the East African Community Customs Management Act, 2004, which will allow local manufacturers to import raw materials and inputs at a lower rate – while at the same time driving consumption of locally produced goods.

“The decisions by the EAC Partner States to stay application of the EAC CET rate and apply a higher duty rate are aiming at stimulating local production by safeguarding manufacturing of that particular product against similar cheap imports,” reads a statement signed by Peter Mathuki, Chief executive of East African Business Council (EABC).

Some of those products include textile in form of garments and textile product such as leather and leather products; edible oil; tiles, processed tea, coffee and cocoa; meat & meat products; and steel articles, iron and metal products.

Proponents of the proposed measures are in line with the EAC Industrialization Plan that seeks to transform the region into a globally competitive and sustainable industrial sector capable of improving livelihoods of the region’s citizens.

The EAC CET is considered a critical instrument of EAC Customs Protocol as it reflects the trade relations between EAC Partner States and the Rest of the World (RoW) with regards to the import duties charged on imported products into the Community.

The implementation of the EAC CET commenced in 2005 after the EAC Customs Union Protocol came into force.

The announcement comes hot on the heels as Kenya is also mulling a free trade deal with the United States (US), this after President Kenyatta and U.S. leader Donald Trump agreed in February to start formal talks on a bilateral trade pact that might help offset concerns about China’s expanding investment imprint on the continent.

Kenya wants to do a deal with Washington before the expiry of the Africa Growth and Opportunity Act (AGOA), which allows sub-Saharan African states to export thousands of products to the United States without tariffs or quotas until 2025.

The African continental free-trade zone, when it comes into effect, would become the largest since the creation of the World Trade Organization in 1994, connecting 1.3 billion people together in a $3.4 trillion economic bloc.

Originally set for July 1, those talks had been delayed because of the coronavirus pandemic and the looming US elections slated for November.

Those talks have however been challenged by a section of trade unions on the grounds that it violates the East African Community (EAC) Treaty and its protocols.

The East African Trade Network (EATN), a membership network comprising civil society organizations, trade unions and farmer groups strongly opposed the proposed Free Trade Agreement (FTA) between the two countries questioning its timing and motive.

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