Kenya to lose in cement tax plan

October 9, 2009

, NAIROBI, Kenya Oct 9 – Kenya stands to be the biggest loser if a proposal to implement zero rating of cement in the region is adopted.

Members of the East African Cement Producer’s Association under the umbrella of the East African Business Council (EABC), say Kenya’s heavy investment in the sector stands to be eroded if the proposal is adopted.

Kenya’s investment in the cement industry stands at close to US $1 billion (Sh74.7 billion.)

EABC Vice Chairman Kelli Kiilu who spoke during a meeting with with Industrialization Minister Henry Kosgey said expressed fears that the industry was at great risk of collapse given the competition it was receiving from cement imported from various destinations including Egypt and China and competitiveness factors which covered the cost of electricity, thermal energy costs and economies of scale.

Under the East African Community Customs Union Protocol, cement was included in the sensitive products list and had a Common External Tariff (CET) pegged at 55 percent in 2005, 50 percent in 2006, 45 percent in 2007, 40 percent in 2008 and 35 percent in 2009 after which it would remain at 35 percent.

However, in July last year the CET was cut from 40 percent to 25 percent.

The group, made up of eight cement manufacturers from Kenya and Tanzania petitioned the minister to convince the other partner states in the East African Community to rethink this implementation it would stifle growth of the industry.

They also requested that the sensitive product status of cement be restored and that the Government invokes additional anti-dumping and countervailing duties in consultation with the cement industry.

A tax waiver on imported cement has sent ripples among industry players who say it’s creating unfair competition in the market, which if unchecked would lead to the closure of some companies that cannot match the competition.

The Minister noted the industry had export revenue amounting to US $102Million (Sh7.6 billion) per Annum and that Government collected taxes to the tune of Sh.4 to 5 billion every year.

“All this will be at stake if the request for lowering of the Common external Tariff on the product is granted,” he said.

Mr Kosgey told the stakeholders that he would immediately seek a meeting with his counterparts in the Ministries of EAC, Finance and Trade to come up with a viable proposal on the issue before the EAC Council of Ministers Meeting set for next month.

“The Government is interested in establishing the relative pricing between local and imported cement and is investigating the breakdown of the cost elements. This will enable us confirm the concerns players in the industry have towards the imported product.”

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