The value of domestic exports has remained low compared to domestic imports. Also notable is that unprocessed agricultural produce is the biggest component of domestic exports, accounting for 41.5 percent of domestic exports in 2023, according to the Economic Survey 2024.
Notably, the value of processed goods, including food and beverages, industrial supplies, machinery, and other capital equipment, accounted for 29 percent of the exports.
Export promotion is a key agenda item for the current administration to grow industries and promote the value-addition of agricultural and other goods that serve as raw materials.
The government introduces fees and levies for specific purposes, including revenue collection, discouraging certain trade practices, funding infrastructure projects, and financing related state institutions. In some instances, fees and levies are instituted at the national and county government levels.
The Miscellaneous Fees and Levies Act 2016 provides for the imposition of duties and levies on imported or exported goods. Additionally, the government imposes fees and levies through other Acts of Parliament, such as the recent directive that brings into force levies on the importation and exportation of selected commodities such as cereals, legumes, and roots at the rates specified in the Crops Act, 2013.
Fees and levies normally impact the overall cost of the related goods, which raises the final price for consumers. Since the fees and levies are akin to consumption taxes, their impact tends to be heavier on the low-income category of people in society. Some levies include the Import Declaration Fee, the Export Promotion Levy, and the Railway Development Levy.
These fees are in addition to county government-specific fees and levies at the regional level. It is also notable that some of the goods that are imported on which some of these levies are imposed are raw materials or intermediate goods that are used in the manufacture of finished goods that are then exported to other countries. This could render exports uncompetitive in the export markets.
The government must analyse the overall impact of fees and levies due to their effect on the cost of living and the competitiveness of exported goods. For instance, goods that are exported should be entitled to a remission of fees and levies that are paid on imported raw materials.
The following is a summary of some of the fees and levies applicable in Kenya and their overarching objective as well as the target goods.
An import declaration fee is imposed on all goods imported into the country for home use based on the customs value of the goods and is paid by the importer of such goods at the time of entering the goods for home use. Exemptions are provided for goods destined to approved special economic zones or export processing zones and goods destined for approved enterprises manufacturing under bond. This is in addition to specific targeted economic activities or players.
Export and investment promotion levy is imposed on all goods specified in the law which are imported into the country for home use. It is paid by the importer of such goods at the time of entering the goods into the country for home use. The purpose of the levy is to provide funds to boost manufacturing, increase exports, create jobs, save on foreign exchange and promote investments. It is not charged on goods originating from East African Community Partner States that meet the East African Community Rules of Origin.
Railway development levy is payable on all goods imported into the country for home use. It is payable based on the customs value of the goods and is paid by the importer of such goods at the time of entering the goods into the country for home use. The purpose of the levy is to provide funds for the construction and operation of a standard gauge railway network to facilitate the transportation of goods.
Last year, the Government introduced the affordable housing levy which requires all employers to pay an equivalent of 1.5 percent of the gross pay of the employees to the KRA. This is meant to finance the development of affordable housing and institutional housing.
The Finance Bill 2024 has proposed the introduction of eco levy on certain goods with the departmental committee on Finance and National Planning recommending the same to be limited to imported goods. The levy is aimed at ensuring importers of the specified goods pay for the negative environmental impacts of the goods. It will be payable to the KRA by the importer at the time the goods are entered for home use. The committee has also recommended an increase in the fuel levy.
Robert Maina is an Associate Director at Ernst & Young LLP (EY). The views expressed herein are not necessarily those of EY.
