Members of Parliament have rejected a bid by the National Treasury to lower the export promotion and investment levy for specific products including iron and steel in a move to protect domestic industry.
The National Treasury had proposed to reduce the levy on the customs value on semi-finished iron or non-alloy steel products containing less than 0.25 percent of carbon from 17.5 percent to 10 percent.
The exchequer, at the same time, proposed to cut the levy on bars and rods of iron and non-alloy steel by the same margin.
The export and investment promotion levy is paid on all goods specified in the third schedule of the Miscellaneous Fees and Levies Act and shall be paid by the importer of the goods at the time of entering them into the country for local use.
The proposed reduction in the levy rate would have lowered the import costs of the materials making them affordable to local manufacturers who rely on such imported inputs.
The Finance and National Planning Committee argued the retention of the levy at 17.5 percent remained pivotal in protecting manufacturers of the same items locally.
“The committee observed that the export promotion and investment levy was first imposed in the Finance Bill, 2023 during a time when the government policies were indicative of the sheer effort of the government to encourage local manufacturing and cushion the local manufacturing market from an inherently disruptive and unpredictable global market,” the committee said in a report to Parliament.
“Therefore, there is a need to allow existing tariff rates to be implemented, as its effects may not be felt in the short run. Therefore, reviewing the rates at this time will negate the government’s intention to protect local industry, spur local manufacturing and create jobs.”
The Miscellaneous Fees and Levies Act says the purpose of the levy is to provide funds to boost manufacturing, increase exports, create jobs, save of foreign exchange and promote investments.
Goods that attract the export promotion and investment levy include cement clinkers, uncoated kraft paper and paperboard, sacks and bags.
The levy is however not charged on goods originating from East African Community Partner States which meet the EAC rules of origin.
The funds collected from the levy are paid into a fund established and managed in accordance with the Public Finance Management Act.
