Governor Nassir’s Mombasa Port tax plan hits headwinds

The Mombasa County government’s plan to tax cargo at the Mombasa Port has run into headwinds after Attorney-General Justin Muturi termed it illegal and unconstitutional.  

In an advisory dated January 23 and addressed to Governor Abdulswamad Nassir and copied to Roads and Transport Ministry officials, Mr Muturi said Mombasa county has no mandate to impose a levy on any goods imported into the country.

The AG argued the move could also undermine national economic policies

Mr Muturi's advisory is the first big test of Kenyan Kwanza's ability to challenge decisions by counties, which can charge new taxes using powers granted to them under the Constitution.

Those copied in the letter are Cabinet Secretary Kipchumba Murkomen, Principal Secretary Mohammed Daghar, his counterpart in the National Treasury Dr Chris Kiptoo as well as Solicitor General Kennedy Ogeto.

Mr Muturi said the powers to impose levies on goods imported into the country is an exclusive responsibility of the national government as provided under Article 209 of the Constitution.

That law grants the two levels of government powers to impose taxes and charges. 

County role

The AG added that the county only has powers to impose property rates, entertainment taxes and any other tax that is authorised by an Act of Parliament.

Article 209 (1) vests on the National Government's exclusive powers to impose income, value-added, and excise taxes as well as customs duties and other duties on import and export goods.

The advisory now sends the county back to the drawing board on its revenue collection plan as it sought to get a share of the proceeds from the Port of Mombasa.

The county had sought legal guidance on the imposition of a county port users infrastructure support and maintenance levy.

Governor Nassir’s administration was targeting the levies to improve its strained infrastructure due to the port business. 

But the move sparked an uproar among some stakeholders since creating an additional levy would increase the cost of doing business at East Africa’s largest seaport and make it uncompetitive.

It would also have seen other counties like Lamu and Kisumu which have ports also demand a share of the revenue.

The proposal in the Draft Mombasa County Finance Bill 2022/2023, provides for the port users' infrastructure support and maintenance levy (excluding all transit and export cargo) charged at the rate of $5 per imported motor vehicle, $10 per container per TEU and $0.5 per metric tonne of loose cargo.

Sh3.2bn proposed collection

Should the proposal have been approved, the county would have collected approximately Sh3.2 billion going by the 1.45 million TEUs and 34.5 million tonnes of loose cargo handled at the port in 2021.

The county had also written another letter to the State Department of Transport on January 16, addressing the Principal Secretaries, National Treasury and Solicitor General.

“According to the letter, the Ministry has noted that some of the proposals will have a negative impact on transport and the wider economy. In this regard, the ministry has stated that there is a need for the National Government to intervene in the proposed bill since it is likely to cause disruption on international port services and international trade at the various points of entry,” said the AG.

Other points of entry the proposal is likely to cause disruption include the port of Mombasa, Mombasa International Airport, and Mombasa Rail Terminal which the AG said provides cross-border services. 

Two weeks ago President William Ruto directed the formation of a team to spearhead talks between the National Government and Mombasa County to harmonise port collection levies. Governor Nassir also recently met Mr Murkomen in Nairobi.