A new directive by Kenya Revenue Authority (KRA) requiring importers of consolidated cargo to pay taxes based on transaction value will spike the cost of living. 

Speaking to Business Hub yesterday, importers and traders said the new rule was already beginning to have a ripple effect on the final cost of the imported goods.

The new directive is a shift from the previous model where importers declared the loose cargo and paid duty at Sh200 per kilogramme.

“For example in Turkey we used to pay between six to eight dollars per kilo. But following the new rule, we are being charged per value of the cargo. Now the value of goods is calculated using the KRA percentage,” said Nelly Mwikamba Chief Executive Officer of Tajiri Fashions Clothing store in Mombasa.

Consolidated goods

While a high dollar rate had automatically affected the price of goods from the source market, Mwikamba said the new rule will make it difficult for the importers to judge how much they will pay for the cargo, until KRA  issues tabulated rates.

“Once goods are consolidated from the origin and shipped to Mombasa/Nairobi, they will be deconsolidated and declared by the individual importers,” said Stephen Rugai of Super cargo in a statement

“It will however have an impact to the final price of the imported cargo. Who will be ready to make a loss? The extra cost will be transferred to the clients who come to buy from us,” Mwikali said.

KRA says the decision to move to the WTO General Agreement on Tariff and Trade model based on transaction value follows abuse of the initial government directive that was aimed at easing costs for small importers.

Car Importers Association of Kenya (CIAK) Chairman Peter Otieno noted that the new directive is in line with the World Trade Organisation (WTO) requirements.

“Actually there is nothing new in the directive because basically that is what is supposed to be happening. There is no change because that has been happening. All along they have been using transaction value and that is what is recommended by the WTO,” explained Otieno in an interview yesterday.