A parliamentary committee has rejected a proposal to retain the current rate of import declaration fee (IDF) of 2.5 per cent saying it would cause a Sh10 billion deficit in the next financial year.
The National Assembly’s Finance and National Planning Committee has instead proposed an increase in the rate to 3.5 per cent.
It has raised the Treasury’s proposal contained in the contentious Finance Bill 2024 that set the rate at three per cent.
“The committee noted that the reduction of the rate of import declaration fee from 3.5 per cent to 2.5 per cent in Finance Act, 2023 occasioned a significant revenue loss amounting to at least Sh10 billion, hence hurting the implementation of the financial year 2023/24 budget,” Kuria Kimani, who chairs the committee said in a report to the House.
“The proposed increase of IDF to 3.5 per cent would, therefore, help to restore the performance of this tax head in line with projected budget estimates for the financial year 2024/25.”
The committee has recommended amendments to the Railway Development Levy (RDL) by increasing it marginally.
Mr Kimani said the extra money collected on account of the proposed increase will be committed to the development of an electric light rail system within the big metropolis in Kenya.
“The committee therefore, did not accept the proposals by the stakeholders to delete the proposed increase of IDF from 2.5 per cent to three per cent,” the team said in its report on consideration of the Finance Bill, 2024.
The Bill seeks to amend the Miscellaneous Fees and Levies Act, Cap 469C to, among others, raise the import declaration fee from 2.5 per cent to three per cent on the value of imported goods.
Of the total IDF proceeds, the Treasury proposes that within the 10 per cent allocation to the Import Declaration Fund, 10 per cent will be designated for covering Kenya's commitments to the African Union and other international organisations.
“Additionally, 20 per cent of this fund will go towards supporting revenue enforcement initiatives or programmes,” Mr Kimani said in the report.
It also rejected proposals from tax experts, law firms, manufacturers, and ordinary Kenyans who suggested deletion of Clause 44(a) of the Finance Bill, 2024 that seeks to increase the IDF from the current rate of 2.5 per cent to three per cent on the value of imported goods.
The Institute of Economic Affairs (IEA), International Air Transport Association (IATA), Kenya Wines Agencies Limited (Kwal), Andersen in Kenya, Oraro and Co Advocates, Ernst & Young LLP, and Grant Thornton opposed the increase in IDF when they appeared before the committee during public participation on the Bill.
Edible Oil Subsector, Shippers Council of Eastern Africa, Civil Society Parliamentary Network, County Assemblies Forum, and Denis Mwangi Maina also opposed the increase in IDF arguing it will affect the price of imported items given that Kenya is a net importer.
