A new Kenyan Tax on goods has stimulated a diplomatic and trade standoff between Kenya and its landlocked neighbours especially Uganda a major trading partner with the coastal nation.
The new tax is seen as a threat to the EAC bloc customs union where Kenya is accused of behaving “big brother wanting to have it all.”
Kenya Revenue Authority (KRA) recently directed that transit goods execute a cash bond equivalent to the tax value of the consignments imposed on them if they were to be sold in Kenya.
The decision has made importers and local authorities furious describing it as a move to hurt inland states’ businesses.
Uganda argues that the genesis of the problem is the increased amount of Ugandan sugar on the Kenya market. Kenya suspects Uganda does not have the capacity to suddenly produce extra sugar.
“They think we have no capacity so we have invited them to the sugar factories,” says Uganda Revenue Authority.
Uganda cargo accounts for about 75% of the total exiting Mombasa.
Importers are supposed to go to the insurance company not the clearing agent.
The whole process means when an imported car exits Busia or Malaba, the importer does not get their transit cash bond back immediately, meaning business capital is tied up.
The importer must go to a bank if they do not have cash, yet the bank will also issue the facility at a cost.
If the importer chose to re-export or redirect the car to say Dar es Salaam, it means additional freight and pay costs of changing documents to KRA.
“It is like somebody telling you; ‘don’t come to my place’, besides very few cars have bonds beyond Ksh1m”.
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