Consolidated cargo tax standoff persists as stocks pile at airports

Jomo Kenyatta and Eldoret airports are experiencing a pile-up of consolidated cargo as the taxman sticks to its guns to unbundle cargo and tax per item.

This is now leading to stockouts of small items among them electronics, cameras, mobile phones and other accessories.

Eldoret International Airport manager Walter Agong on Thursday said the situation is worsening with the facility receiving its last cargo flight last month.

Read: KRA to tax small traders per product

Some of the goods affected in the new tax plan by the Kenya Revenue Authority (KRA) include mobile phones, second-hand clothes, electronics and other household goods.

“There has been a standoff since KRA shifted to start charging consolidated cargo per transaction value as opposed to Sh200 per kilogramme. This standoff has resulted into a huge pile-up of uncollected consolidated cargo more so perfumes and phones at our airport,” Mr Agong told the Business Daily in an interview.

“The situation is serious to the extent we have not been receiving cargo flights at this airport except last month when two planes came,” he said.

Mr Agong said there is also no meaningful clearance of consolidated cargo going on at JKIA in Nairobi.

The Kenya Groupage Cargo Handling Association (KGCHA) chairman Solomon Muema said informal cargo consolidators will continue to face problems with the taxman until they follow the due process of clearance.

This is because currently, they can’t lodge a customs manifest for respective consignees for entry.

“Non-informal cargo consolidators must be registered by the Kenya Maritime Authority, join our association and we will be able to help them,” he said.

In a bid to restore normalcy at Eldoret International Airport, the taxman on Thursday held a consultative meeting with 25 cargo consolidators from the region to try and iron out all the thorny issues.

“The objective of the meeting will be to deliberate on clearance procedures at the Eldoret International Airport and the full resumption of cargo flights. Your participation and input will be important in identifying resilient solutions that are most effective at enhancing trade facilitation and compliance,” said KRA in a letter to the directors of the companies dated August 1, 2023.

KRA on June 1 started a 100 percent check of imports to enable payment of tax based on the transaction value of the cargo as opposed to the rate of Sh200 per kilogramme.

It means that these items, which end up in open-air markets such as Gikomba and Nyamakima, will now attract import duties, Value Added Taxes (VAT), excise duty, import declaration levy (IDL) and Railway Development Levy (RDL).

Read: KRA misses revenue target by Sh107bn

Small traders could now start paying import duty ranging from zero percent for raw materials to 10 percent for intermediate goods and 25 percent for finished products.

Except for a few exempted goods, they will also pay the 16 percent VAT as well as excise duty for excisable goods.

Imports also attract import declaration fees at 3.5 percent and a two percent railway development levy.

Consolidators are charging traders Sh999 ($7) for a kilogramme of cargo transported by air and Sh714 ($5) shipped by sea.

The decision to tax importers of consolidated cargo per transaction value was arrived at by the taxman after the initial arrangement was abused by traders.

In an interview with NTV last month, KRA acting Commissioner-General Rispah Simiyu said the tax agency had found that importers were concealing smartphones as feature phones to evade paying the requisite tax.

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