The Kenya Association of Manufacturers (KAM) recently held a meeting with the International Monetary Fund (IMF) to discuss some of the most pressing issues that have been impacting their operations.
The meeting, which was held on Tuesday, saw KAM representatives raise concerns about a range of issues, including high taxation, which they believe has been adversely affecting businesses countrywide.
According to KAM, the current taxation measures that have been put in place by President William Ruto’s administration have resulted in a significant increase in the cost of production for companies, making it harder for them to operate effectively.
While the statement released by KAM did not provide specific details about the taxes in question, it was clear that the situation was dire.
As one of the largest employers in the country, KAM members have been hit hard by the new taxes and levies, including the 1.5 percent Housing Fund and revised National Social Security Fund (NSSF) contributions.
The team also raised concerns about the declining shilling and dollar shortage experienced by manufacturers, which has been affecting local manufacturing.
The manufacturers cited their dependence on dollars to import raw materials, which has been significantly impacted by the shortage, resulting in a decline in output and overall business performance.
Additionally, the Ruto administration has been keen to increase taxation on raw materials brought into the country, such as the 7.5 percent on clinkers used in cement production.
The meeting with the IMF was an opportunity for KAM to raise its concerns about the availability and pricing dynamics of the US dollar, which heavily impact local manufacturers.
The shortage of dollars in the market has made it difficult for manufacturers to meet import payment obligations on time, leading to delays in procurement of raw materials for processing, which in turn interferes with production schedules.
The delays in VAT refunds by the taxman were also raised as an area that needs to be improved. While the duration of the delays was not highlighted, President Ruto instructed the taxman to pay all verified VAT refunds within six months.
Regulatory burden on manufacturers was another issue that was discussed at the meeting. KAM emphasized the need for a long-lasting solution to the fiscal and regulatory challenges affecting its members.
Interestingly, KAM’s concerns came after President Ruto’s economic advisor, David Ndii, noted that taxation of businesses was a key area the Kenya Kwanza administration was seeking to address in the coming financial year.
However, Ndii expressed concern over the poor lobbying of businesses on taxation matters, even as he described the current taxation regime as unstable.
As KAM and other stakeholders work towards finding a solution to these challenges, it’s important for the government to take note of these concerns and find ways to support local manufacturers.