The Kenya Association of Manufacturers (KAM) met with representatives from the International Monetary Fund (IMF) to discuss four key issues affecting their operation, including high taxation.
In a statement on Tuesday, the association noted that the current taxation measures adopted by President William Ruto's administration were affecting businesses countrywide.
While details of the specific taxes were not revealed in the statement, it was noted that the cost of production of the companies had gone up.
KAM members are one of the biggest employers in the country and have been hit hard by the new taxes and new levies including the 1.5 per cent Housing Fund and revised National Social Security Fund (NSSF) contributions.
The team also noted that the declining shilling and dollar shortage experienced by manufacturers are also affecting local manufacturing.
According to the manufacturers, they depend on the dollars to import raw materials. Therefore, the shortage was impacting their output and business overall.
Ruto's administration has also been keen to increase taxation on raw materials brought into the country, such as the 7.5 per cent on clinkers - which are used in the production of cement.
"During the meeting, KAM emphasized the impact of the availability of the US dollar and its pricing dynamics on local manufacturers. This is because local industry is heavily dependent on raw materials and intermediate goods for processing and capital goods for investment.
"Additionally, fluctuation in the availability of the US dollar in the market hinders manufacturers’ ability to meet import payment obligations on time, which delays procurement of raw materials for processing, thus interfering with production schedules," read the statement in part.
On the other hand, delays in VAT refunds by the taxman were noted as an area that needs to be improved.
While the manufacturers did not highlight the duration of the delays, Ruto, on March 31, directed the taxman to pay all verified VAT refunds within six months.
The regulatory burden on manufacturers was also discussed at the Tuesday meeting.
"We shall continue to work together with the IMF and like-minded partners to establish a long-lasting solution to the fiscal and regulatory challenges affecting our members," read the statement in part.
Notably, the concerns raised by the business tycoons came after Ruto's economic advisor, David Ndii, noted that taxation of business was a key area the Kenya Kwanza administration was seeking to address in the coming financial year.
However, Ndii expressed concern over the poor lobbying of businesses on taxation matters, even as he described the current taxation regime as unstable.
"We have a very bad lobbying system coming from even the manufacturers. One person is lobbying for protection on this and another one is lobbying for something with the opposite effect," Ndii stated during an economic forum on Tuesday.
"We have the tax policy that we found and we will look at it and come up with a coherent set of principles by which we are going to change tax and a much more predictable way of tax."
