The government has decided to reinstate the Import Declaration Fee (IDF) to 3.5 per cent after a previous attempt to lower it resulted in a loss of Ksh10 billion in revenue within one year.
In the Finance Bill 2024, the Ministry of Treasury proposed increasing the fee to meet the government's budgetary target of Ksh3.9 trillion.
IDF is a tax imposed as a percentage of the cost, insurance, and freight (CIF) value of goods, affecting imports valued at Ksh5,000 and above.
In the 2023/2024 Finance Bill, the fee had been reduced from 3.5 per cent to 2.5 per cent in an effort to provide relief to businesspeople and importers.
The National Assembly Finance Committee chaired by Molo MP Kuria Kimani, however, observed that the state struggled to fund its budget after losing the revenue.
"The Committee notes that the reduction of the rate of import declaration fee from 3.5% to 2.5% in Finance Act, 2023 occasioned a significant revenue loss amounting to at least KSh. 10 billion, hence hurting the implementation of the FY2023/24 budget," read the proposed bill in part.
"The proposed increase of IDF to 3.5% would, therefore, help to restore the performance of this tax head in line with projected budget estimates for FY2024/25."
The state is also eying to increase the Railway Development Levy (RDL) in efforts to shore up revenue collection.
"Further, the Committee recommends making amendments in respect of the RDL by increasing it marginally," added the bill.
"The additional money collected on account of the proposed increase shall be committed to the development of an electric light rail system within the big metropolis in Kenya."
However, the state has proposed to exempt inputs raw materials, and machinery used in the manufacturing of mosquito repellents from from IDF and RDL.
In April this year, the Kenya Association of Manufacturers (KAM) appealed to President William Ruto to further lower IDF to help reduce the cost of imported industrial inputs.
Specifically, the manufacturers wanted the fee to be dropped from 2.5 per cent to 1.5 per cent.
"To reduce the cost of imported industrial inputs, the government should reduce the IDF rate from 2.5% to 1.5% for raw materials, intermediate inputs, industrial machinery and spare parts," read part of the recommendations contained in the Manufacturing Priority Agenda (MPA) 2024 report.
"Remove excise duty and Export and Investment Promotion Levy on raw materials, intermediate inputs and packaging materials; and adhere to the philosophy behind the EAC Common External Tariff (CET) structure," added the association.
