The Policy Issues with the Kenya Revenue Authority.

IS KRA KILLING KENYAN BUSINESSES?

I wish to speak as one who has and still works with the Kenya Revenue Authority closely for the last 8years or there about. Especially the Customs Services Department (CSD) which as many don’t know, is the main wing of the authority that deals in imports, exports, and all freight handling activities within the country and licenses Clearing and Forwarding Agents, Importers, Container Freight Stations, Warehouses and all other such organs that deal in freight handling.

It also manages the whole world of freight handling by applying the EACCMA (East African Community Customs Management Act) and other regulations and acts, specifically Cap 472 of the Laws of Kenya. From my close work with them I commend them for the job they do. Apart from a few rogue officers (of course no organization lacks those) the rest are doing well in their chores. But there is one aspect about Customs that really makes me wonder if they have any consideration or portfolio of `STAKEHOLDERS’ in their policy and strategic plans. For they sit in a boardroom with few people who have never been on the ground to understand the dynamics of cargo handling and come up with laws and regulations that are more of what we call NTBs (Non Tariff Barriers) than to safeguard the flow of cargo around.

Who, for instance crafted and has been over time pushing for the implementation of the directive that all motor vehicles of over 2000cc and on transit to other East African Community countries be put under a cash bond of the equivalent taxes payable in Kenya  were it to be imported? This law also adds that goods like sugar, rice, cooking oil, powdered milk and the ilk deposit the equivalent of the bond amount in cash to be allowed to transit through Kenya. This is preposterous, and you will agree on me if you know how freight logistics works. One, KRA didn’t consult the stakeholders on this for if they did, no one who has been on ground in freight handling would consider this. Two, there are other many ways of ensuring cargo on transit is safely delivered to the respective borders after dispatch from the port of Mombasa and they include but not limited to; Border Control officer escorts, Police escorts and patrols, use of ECTS (Electronic Cargo Tracking System) which KRA pushed transporters to install on all trucks ferrying Transit Goods in the last year, among others.

Three lets look realistically at what that directive means: say a Ugandan Importer imports 200 bags of sugar in 50 kg bags and in 1x20 foot containers, they have to be put on transit bonds so they can transit through Kenya to Malaba border. This is done via a customs SED (single entry document) called CB17, formerly C36 under the CPC (Customs Procedure Codes) T810. The importer has to engage a Customs Agent to undertake this transaction. Now if the directive applies, sugar pays 100% duty, that is if you buy a kg of sugar abroad at Ksh100,add freighting costs etc you get the FOB value of say Ksh120, then you have to pay to KRA Ksh120/kg as duty. So after importation, the cost of the sugar will be Ksh240. Now for the case of transit goods in case of this Ugandan trader, it will be that: if he has his 200bags, and each cost him Ksh6000 (@120 per kg) then the total cost for the whole consignment will be Ksh1, 200,000. Applying the new directive, this trader will have to deposit an equivalent amount with KRA in cash! So if he has 1000MT he has to make a cash bond of a whooping KSH 120,000,000 to KRA! And if we have 50 such traders with equal quantities, then it will be Ksh6, 000,000,000! Where on earth will KRA keep such cash and I have not considered the cash bonds on the hundreds of thousands of motor vehicles going through the country daily! Hey! Come on is someone trying to raise cash for a short time project here?!

Lastly, considering the slow way KRA deals with refunds, what guarantee will be given to the trader that after a truck leaves the port of Mombasa and is driven overnight, and it crosses to Uganda, for the border works 24/7, the trader will get his refund the next day. For it takes roughly one and a half days to transit from the port to Malaba , Busia, Isebania etc, that means, if you deposit your cash bond today, you need a refund tomorrow, is KRA ready to deal with the avalanche of refunds? Me thinks it’s a big No! So where are we? In spirit of the EAC of facilitating trade, and in line with the Mission –Vision statement at KRA ,this directive should be Withdrawn ASAP and other cargo monitoring systems be embraced to avoid creating an NTB that is to the benefit of none but a detriment to trade with our partners. Lastly, the last time I checked, Dar Salaam is upgrading its port and Tanzania is also modernizing their Tanga port plus a neo - railway line to link Mutukula (the Tanzanian – Uganda border). We will be the ultimate losers here, but the boardroom policy makers at KRA don’t have this foresight or they just don’t care.

Jumbah Amaheno

Bungoma County.

Monday 17^th September 2012.