PRESS STATEMENT:
FINANCE BILL 2021: PROPOSAL TO REMOVE “EXPORTATION OF GOODS OR TAXABLE SERVICES FROM ZERO RATED SCHEDULE AND INCLUDE THEM IN THE EXEMPT SCHEDULE”.
We wish to draw your attention to the above proposal in the 2021 Finance Bill that is to come into effect on 1st July 2021.
If the above proposed amendment comes into effect it will have very serious and adverse impact on the costs of transportation and subsequently cost of Kenyan Manufactured goods exported/transported to the EAC region by Kenyan road and railway transporters.
By listing exportation of goods or taxable services in the exempt schedule the impact is that input VAT claim will be restricted to a proportion of vatable sales over total sales less exempt sales.
Currently, exportation of goods or taxable services are listed under the zero rate schedule and as a result input VAT is claimed in full.
The result of restricting input VAT claim is that the unclaimed VAT amount is added to the cost of the export service.
The EAC countries apart from Kenya have all zero rated exportation of goods or taxable services. This is in line with the standard treatment in the world.
IMPACT OF THIS AMMENDMENT TO THE INDUSTRY & KENYA ECONOMY.
$11. Kenyan Transporters involved in exports transportation to the EAC countries are better off moving to Uganda or Tanzania and still load the same consignments, but pay taxes in those countries as this will enable them compete and operate in an affordable manner compared to transporters in those EAC countries.
$12. Cost of exportation of goods and services will immediately increase as the unclaimed input VAT becomes part of the Cost.
$13. Transporters from Uganda, Tanzania and the EAC region in general will be advantaged over Kenyan transporters as they can claim the full input VAT. It will be cheaper for importers in those countries to engage non Kenyan transporters to come to Kenya and collect their goods.
$14. While the Kenya government is seeking to reduce VAT refunds, this amendment will have the effect of reducing taxes received by the government and unemployment will increase. The opposite will happen to our neighboring countries; an increase in employment and increased collection of taxes from transporters that were initially operating from Kenya and consequently, improving their economies.
The above amendment goes against existing world treatment of exportation of goods or taxable services.
WE REQUEST PARLIAMENT AND TREASURY TO REVERSE THE PROPOSAL IMMEDIATELY AND SAFEGUARD KENYA TRANSPORTERS AND OUR ECONOMY.
