In a statement released yesterday, Kioo Limited it has raised the issues with the relevant ministries in the country but has also approached East African Court Justice to urgently intervene as the tax imposed is a clear violation of the EAC’s Customs Union Protocol.
Kenya recently enacted the Business Laws (Amendment) Act, 2020 which amended the Excise Duty Act of 2015 by imposing the new tax on imported glass bottles (excluding glass bottles for packaging pharmaceutical products) at a rate of 25 percent with effect from March 18, 2020.
“Under the Excise Duty Act, there are no exemptions granted to goods imported into Kenya from East African Community partner states and the new excise duty rate of 25 percent will therefore apply to glass bottles imported into Kenya from Tanzania,” the Dar es Salaam based company said in its statement.
The company further added that the amendment will result in an increase in the cost of imported glass bottles compared to those which are locally manufactured in Kenya hence impose a tariff barrier.
“The integration pillars of the East African Community include, the establishment of a Customs Union and a Common Market. Articles 75 and 76 of the Establishment of the East African Community Treaty, respectively provided for establishment of the Customs Union and Common Market,” said the statement.
The company explained that under the Customs Union Protocol, member states commit to deepen and strengthen trade among themselves hence agreed to eliminate internal tariffs and other charges of equivalent effect as well as eliminated non-tariff barriers to boost intra-regional trade.
The statement added that the Customs Union Protocol on the establishment of the East African Community Common Market is aimed at accelerating economic growth and development by providing for free movement of goods, labour, services, capital and the right of establishment within the EAC bloc.
“Kenya’s recent actions with respect to the excise duty on glass from Tanzania contravene the provisions of the EAC Treaty. Kenya is an important market of glass and glass products manufactured by Kioo,” the company lamented.
It also said that this will affect Kenyan glass purchasers as they will have to rely only on glass produced within Kenya adding that there are two glass producers in Kenya and they, together, cannot meet the total domestic demand but also do not currently have the capability to supply the technology that Kioo offers.
It said that Tanzania and Kenya have more or less the same cost structures and market potential because while Tanzania has local gas available, Kenya has local soda ash both of which are major cost drivers in the business and almost neutralize the advantage to both countries.
“During current Covid 19 outbreak when markets are already badly affected, this has come as a body blow to Kioo Limited,” the statement noted saying the company converts locally available materials into value added finished product as championed by President John Magufuli’s industrialization drive.
Kioo is one of the largest manufacturers of container glass for the soft drinks, beverage, beer, liquor and food industry in the EAC bloc with the most modern and technically capable plant which offers best quality, light weight and cost reduction opportunities to customers.
The statement went on that Kioo has invested significantly over the years to enhance the capabilities of the plant and it employs over 600 people in direct employment and many more indirectly that support the business. It elaborated that currently, the plant has a capacity to produce about 400 tons of glass per day and it exports almost 60 percent of its products after meeting local demand.