Tanzanian glass company takes KRA to court over 25pc import tax

A glass manufacturing plant. Tanzanian glass company Kioo has taken the Kenya Revenue Authority to court for charging excise duty on its products. PHOTO | FILE | NATION MEDIA GROUP 

In Summary

• Kioo is one of the largest manufacturers of container glass used for packaging of soft drinks, beer, alcohol and food in East and Central Africa.
• The company exports almost 60 per cent of its products outside Tanzania, after meeting its local requirement.

By LUKE ANAMI
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Tanzanian glass manufacturer Kioo Company Ltd has taken the Kenya Revenue Authority to the East African Court of Justice following the introduction of a 25 per cent excise duty imposed on imported glass.

Based in Dar es Salaam, Kioo is one of the largest manufacturers of container glass used for packaging of soft drinks, beer, alcohol and food in East and Central Africa.

The company exports almost 60 per cent of its products outside Tanzania, after meeting its local requirement.

In the application, Kioo claims Kenya recently enacted the Business Laws (Amendment) Act 2020, which amended Kenya Excise Duty Act 2015 by introducing excise duty on imported glass at a rate of 25 per cent with effect from March 18, 2020.

They say the introduction of excise duty, excluding glass bottles for packaging pharmaceutical products, is a breach of the Customs protocol.

Kioo is represented by the firm Anjarwalla & Khanna, and Kenya’s Attorney General Paul Kihara is the respondent.

They want EACJ to ensure Tanzania’s rights under the EAC Treaty are not violated, the enacted excise duty is removed, and that Kenya is fined for their actions.

Under the Kenyan Excise Duty Act there are no exemptions granted to goods imported from the EAC partner states as the Act defines importation “as bringing or causing goods to be brought into Kenya from a foreign country, a special economic zone or an export processing zone”.

Tanzania accused Kenya of providing “preferential treatment of domestic products vis-à-vis similar products originating from other EAC Partner States” in violation the EAC Customs Union.

Tanzania is concerned that KIOO, is losing its competitive edge by paying duty at a rate of 25 per cent on its imported inputs, which should have ordinarily attracted zero per cent or 10 per cent duty as per the EAC Common External Tariff (CET).

CET guarantees zero per cent tax on raw materials, 10 per cent for intermediate goods and 25 per cent for finished goods.

Tanzania further claims that the 25 per cent duty on its glass bottles into Kenya is being incurred by her customers in Kenya, thereby making the business uncompetitive. This likely to squeeze out Tanzania and her neighbours out of the Kenyan market.

“The result is that the price of glass bottles exported into Kenya by Tanzania has become more expensive than locally manufactured glass in Kenya and therefore Kenyan companies have reduced their demands /imports from Tanzania. In the current economic hardship caused by Covid-19, the Kenyan companies are likely to stop importing glass from Tanzania and any other glass bottle manufacturers within the EAC Partner states,” the lawyers say.

The move is also likely to render more than 600 workers at Kioo jobless.

Kenya is yet to respond to the application.

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APPLICATIONS

Tanzania wants the East African court to prohibit KRA from taxing its imports to Kenya.

“It is therefore in the interest of justice to the nature and urgency of the application, and to avoid irreparable injustice being occasioned on Tanzania, this honourable court issues order to prohibit, restrain, and injunct the Government of Kenya ... from continued implementation of the impugned decision at the exparte stage,” the application states.