MPs have raised the Railway Development Levy (RDL) from 1.5 percent to 2.5 percent of all imported goods as part of the amendments to the Finance Bill 2024 that could up the cost of shipments from abroad.
The proposal to adjust the levy upwards was made by the Finance and Planning Committee in its report on the Bill, saying that the additional money collected should go towards the development of an electric light rail system in Nairobi.
MPs voted in favour of the 2024 Finance Bill by a majority of 195 votes in favour and 106 against after the legislation passed through the Committee of the House in record time Tuesday.
In the 2022/2023 fiscal year, the RDL raised Sh29.64 billion, according to Treasury disclosures, with the new rate set to raise the collection from the levy if the Bill passes its last stage of assent by President William Ruto.
The decision by MPs to raise the levy to 2.5 percent marks a reversal of the cut that was put in place in the 2023 Finance Act, which slashed it to 1.5 percent from 2.5 percent.
The RDL was introduced in the 2013 Budget by then Finance CS Henry Rotich, who said that the fees collected would be used to help fund the Mombasa-Kisumu standard gauge railway, whose construction began in 2014.
The initial rate was set at 1.5 percent of the value of imports-with the Treasury targeting at least Sh15 billion in the first year of the levy—before it was raised to a higher threshold in subsequent budgets.
The Committee included the increase in the RDL in a package of changes to the Bill that saw a number of controversial tax measures removed, and new ones introduced in order to cushion the exchequer from the expected loss of revenue.
The reversed measures included the 2.5 percent car tax, VAT on bread, diapers and financial services and higher excise on cash transfers and imported sweets.
Others were the limitation of the eco levy to imported finished products, excise on cooking oil, excise on agriculture pest control manufacturing inputs and higher excise on motorcycles.
Imports levy
In addition to the RDL proposal, the Committee proposed to raise the Import Declaration Fee (IDF) to 3.5 percent from 2.5 percent, citing a need to reverse the loss of Sh10 billion annually as a result of last year’s cut in the fee to 2.5 percent from three percent.
It also backed a proposal by the Roads and Transport Ministry to raise the fuel levy, also known as Road Maintenance Levy, to Sh25 per litre of petrol and diesel from the current Sh18 per litre.
The fuel levy change is however not part of the Finance Bill, but is instead being addressed through an amendment to the Road Maintenance Levy Fund Act.
The Finance Committee also called for imposition of the Export and Investment Promotion Levy on leather products, imported footwear, denatured ethyl alcohol, ceramic sinks, and wash basins and fully built imported motorcycles to boost the revenue drive.
