Tax dilemma for Kenyan traders despite EPAs deal

October 16, 2014
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, KARANJA-KIBICHO=PSNAIROBI, Kenya, Oct 16 – It is still uncertain whether Kenyan exporters to the European market will get any refunds for the taxes they are already incurring after the Economic Partnership Agreements (EPAs) talks between the EU and the East African Community missed the October 1, 2014 deadline.

The exporters are expected to pay Sh670 million monthly in taxes for up to six months, the period it may take for Kenya to go back to the duty free status even after the conclusion of the trade deal on Tuesday this week in Brussels, Belgium.

Speaking at a media briefing after his return from Belgium, Foreign Affairs and International Trade Principal Secretary Karanja Kibicho said he could not give a clear stand on the possibility of reimbursement until ongoing negotiations on the matter with the EU are complete.

“What the government is doing is negotiating this to see the best method of cushioning the private sector because this is something we did not anticipate. I think it would be premature for me to say what the actual action will be,” Kibicho told journalists.

The PS was however optimistic that there will be a solution of cushioning the exporters so as not to interrupt trade as well as ensure there are no job loses within that period.

“This is a process that is going to take a bit of time. But we have met here many times. We have a technical team composed of both the private sector and our technical people to work out the best method of cushioning this,” Kibicho assured the private sector.

He said his ministry and that of the East African Affairs were doing their best to have the EU fastrack the process of getting Kenya back to its duty free status for products entering the European market in three months time.

“I hope that our engagement with the EU might provide even a further reprieve. But between now and the time that we start the duty free access the meaning is that the exporters to the EU cumulatively will have to pay Sh670million a month,” the PS said.

European Union Ambassador to Kenya Lodewijk Briet said the issue of reimbursement maybe difficult since deadlines were not reached but remained optimistic.

“We have missed a number of deadlines unfortunately and it became very clear that when we did not conclude by June when we had scheduled to meet, we would no longer be able to help Kenya stay out of the Generalised Systems of Preferences (GSP) tariffs,” Briet said, “and since we missed the October 1 deadline refunding is next to impossible.”

After Kenya is back to free EU market within a maximum of six months, the 700-page document will then to go through legal scrubbing and have the final signatures by ministers and be appended within four months.

Some of the issues that delayed the talks and which are now solved include export taxes, export subsidies and relationship between Cotonou agreement and EPAs.

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