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UK fights higher Kenyan taxes on its whiskies, car parts
The United Kingdom has made an official complaint over the higher import duty Kenya charged on some of its products, a senior government official has revealed.
In line with the East Africa Community (EAC) Customs Union, Kenya applied a tariff of 35 percent on imported whiskies from the UK. However, the Economic Partnership Agreement (EPA) the two countries signed sets import duty on whiskies from the UK at 25 percent.
Trade Principal Secretary Alfred K'Ombudo said the UK argued for a standstill of the higher tariff, which would contradict the regional bloc's CET (common external tariff).
“This was formally presented as a grievance by the UK before the EPA Council,” said Mr K’Ombudo. The EPA Council is the decision-making body that the two countries formed.
The PS noted that at the initiation of the trade department, a technical working committee was formed to address the problem.
“We are in consultation with various State agencies, including the Kenya Revenue Authority, the National Treasury and Kenya Bureau of Statistics (Kebs),” he said.
The UK-Kenya Economic Partnership Agreement allows UK products such as whiskies, cars and car parts to be charged a levy of 25 percent.
Kenya has also ratified another EPA with the European Union which is yet to be effected in Brussels. This means that the EU deal will also find itself in the same dilemma should it be ratified by Brussels.
“Under the EAC protocol, Kenya should adopt the EAC Common External Tariff (CET),” said Robert Waruiru, a tax expert.
“The EPA gives reciprocal lower rates for imports from the EU… perhaps the push (by Kenya) for a revision of the CET bands.”
In June 2022, the EAC, an eight-member free trade area to which Kenya belongs, increased the import duty on spirits and wines to 35 percent, in what was aimed at encouraging local production.
Treasury Cabinet Secretary Njuguna Ndung'u earlier said that the EPA has a standstill clause on the parties agreeing “not to increase their applied customs duties for products subject to liberalisation under this agreement".
"The tariff concessional rates, just like for Comesa or AfCFTA, are administered based on Rules of Origin Criteria, so Kenya will monitor the UK imports/exports under the EPA trade arrangements in line with the provisions in the schedule," he said.
In the Medium Term Revenue Strategy, 2023, Kenya says it will push for the lowering of the higher band of CET from 35 percent to a range of between 15 and 20 percent, citing challenges in implementing the multiple rates.
The EAC implements a four-band CET, starting with a minimum CET rate of 0 percent for raw materials and capital goods; 10 percent for intermediate goods not available in the region; 25 percent for intermediate goods available in the region and 35 percent for imported finished products available in the region.
“These multiple rates provide differential protection to industries, especially in the manufacturing sector, thereby providing higher incentives for downstream industries relative to upstream industries,” the Treasury said in the medium-term revenue strategy paper.
The Treasury added that the multiple rates also created classification disputes resulting in delays in cargo clearance.
“To address these challenges, Kenya will request for [sic] duty-free for all primary raw materials/inputs and capital goods and one common duty rate in the range of 15 to 20 percent for all other imported goods for consideration by the EAC Council,” added the Treasury.
In the EU-Kenya EPA, it was acknowledged that the decision by Kenya to go alone in signing the EPA was expected to present a challenge in case there is an adjustment of tariffs.
