TANZANIA – Tanzania glass container manufacturer, KIOO Limited has raised concerns pertaining the newly introduced 25% excise tax on glass imports into Kenya through the Business Laws (Amendment) Act, 2020.
Kioo Limited has raised the issues with the relevant ministries in the country but has also approached East African Court Justice to urgently intervene citing that the tax imposed is a violation of the EAC’s Customs Union Protocol, reports Ippmedia.
Kenya recently enacted the Business Laws (Amendment) Act, 2020 which amended the Excise Duty Act of 2015 by imposing the new tax on imported glass bottles (excluding glass bottles for packaging pharmaceutical products) at a rate of 25 percent with effect from March 18, 2020.
“Under the Excise Duty Act, there are no exemptions granted to goods imported into Kenya from East African Community partner states and the new excise duty rate of 25 percent will therefore apply to glass bottles imported into Kenya from Tanzania,” the Dar es Salaam based company said in its statement.
The company further added that the amendment will result in an increase in the cost of imported glass bottles compared to those which are locally manufactured in Kenya hence impose a tariff barrier.
“The integration pillars of the East African Community include the establishment of a Customs Union and a Common Market. Articles 75 and 76 of the Establishment of the East African Community Treaty, respectively provided for establishment of the Customs Union and Common Market,” said the statement.
The company explained that under the Customs Union Protocol, member states commit to deepen and strengthen trade among themselves hence agreed to eliminate internal tariffs and other charges of equivalent effect as well as eliminated non-tariff barriers to boost intra-regional trade.
The company added that the Customs Union Protocol on the establishment of the East African Community Common Market is aimed at accelerating economic growth and development by providing for free movement of goods, labour, services, capital and the right of establishment within the EAC bloc.
“Kenya’s recent actions with respect to the excise duty on glass from Tanzania contravene the provisions of the EAC Treaty. Kenya is an important market of glass and glass products manufactured by Kioo,” the company stated.
It also said that this will affect Kenyan glass purchasers as they will have to rely only on glass produced within Kenya adding that there are two glass producers in Kenya and they, together, cannot meet the total domestic demand but also do not currently have the capability to supply the technology that Kioo offers.
This was the same notion held by Kenyan brewers who joined hands with other glass bottle users to protest the excise tax introduced, saying it will be punitive since the industry relies heavily on imports.
In a memorandum presented to the Departmental Committee on Finance and National Planning, the glass users comprising the Kenya Breweries Limited (KBL), Coca-Cola beverages Africa, UDV Kenya Limited, Kenya Wines Agency Limited (KWAL) and Trufoods Limited have asked that the excise duty be removed for being counterproductive.
“Local glass making companies do not have the capacity to serve increased orders. They lack modern glass technology, which prevents them from switching from one type of glass to the next efficiently and the protection of glass manufacturing companies in Kenya violates the principle of equity and fairness in the taxation of excisable goods.”
“It will increase the cost of alcoholic products and soft drinks beverages in a season when household disposable income is facing the greatest negative impact due to the Covid-19 pandemic,” the manufacturers wrote.
On the flip side of the situation Kenyan glass manufacturers have backed the 25% duty citing it is away for the government protecting the local industry.
Consol Glass and Milly Glass say local manufacturers have the capacity to meet local demand.
“This is the government protecting local industry and if you look at our investment in glass in the region it has had a slow growth because of imports that are being dumped from Egypt, the Middle East and Comesa countries,” said Consol Glass Managing Director Joe Mureithi.