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Manufacturers seek IMF intervention over Ruto’s high taxes

The International Monetary Fund (IMF) met with officials of the Kenya Association of Manufacturers (KAM) to examine four major concerns that impact their business, including excessive taxes.

The group said in a statement on Tuesday that businesses across the nation are being impacted by the current tax policies implemented by President William Ruto’s administration.

Although the announcement did not disclose the precise taxes, it was seen that the companies’ production costs had increased.

One of the largest employers in the nation, KAM members have been severely impacted by the new levies and taxes, such as the 1.5% Housing Fund and the updated National Social Security Fund (NSSF) contributions.

The group also observed that local production is being impacted by the manufacturers’ dollar scarcity and dropping shilling.

The producers claim that in order to import raw materials, they are dependent on the dollars. As a result, their total business and output were being impacted by the scarcity.

Ruto’s government has also been eager to raise taxes on imported raw materials, such the 7.5% clinker tax, which is levied on components used to make cement.

KAM stressed throughout the conference how local firms are affected by the US dollar’s availability and its pricing characteristics. This is a result of the local industry’s reliance on capital goods for investment as well as raw materials and intermediate goods for processing.

Furthermore, changes in the value of the US dollar on the market make it more difficult for manufacturers to fulfill their import payment requirements on time, which causes delays in the acquisition of raw materials for processing and messes with production schedules.

On the other hand, it was mentioned that there is a need for improvement regarding the taxman’s delays in returning VAT.

The length of the delays was not specified by the manufacturers, but on March 31, Ruto gave the taxman instructions to pay all validated VAT refunds within six months.

During the Tuesday meeting, there was also talk on the regulatory load that manufacturers face.

Notably, Ruto’s economic advisor David Ndii mentioned that one of the main issues the Kenya Kwanza administration was hoping to resolve in the upcoming fiscal year was company taxation, which sparked the business titans’ fears.

Ndii called the existing tax system unstable, but he also voiced concern about the inadequate business lobbying on tax issues.

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