The Kenya Revenue Authority (KRA) will be shutting down the bonded warehouses signaling the end of cheap and affordable alcoholic beverages, car spare parts, and cigarettes.
The move by the taxman means that independent importers of wines and spirits, cigarettes, motor vehicles, and spare parts are going to be hit hard with custom duty and will have to transfer the costs to the consumer.
For years, bonded warehouses have been allowing independent importers to store their goods in KRA custom warehouses without paying custom duty until they are ready to either sell them locally or export them.
The bonded warehouses also allowed the importers to sell their goods in small quantities and paid taxes on what they sold and not the whole consignment.
From August 12, 2020, independent importers of such goods as wines and spirits, motor vehicles, cigarettes, and spare parts will no longer be allowed to warehouse their goods without paying custom.
The move will also mean that the goods will, going forward, attract full custom duty on their entry into the country, a move that could drive thousands of independent importers out of business.
Only large importers of wines and spirits such as East African Breweries Limited (EABL) will be allowed to store their consignments at custom warehouses without paying the customs duty.
According to the Gazette Notice 3530 of May 13, 2020, “foodstuffs in any form, including bulk commodities, ashes, lubricants and batteries including motor vehicle batteries are prohibited from the bonded warehouses.”
The Notice also prohibits construction materials including stones, paints, nuts, bolts, pipes, electric parts among others. Importers of cameras and phones have no luck too for they will have to pay full customs duty upon the entry of their goods into the country.
According to PwC, “the timing of the changes could not have come at a worse time considering the current global pandemic that has negatively impacted businesses’ cashflows and employment opportunities.”
The changes also shows how hypocritical the government of President Uhuru Kenyatta is especially after promising to ease the cost of doing business for Kenyans during this Covid-19 period.