Mbadi prepares to reimpose eco levy on multinationals
Faced with the harsh reality of thinning revenue lines amid growing spending, new Treasury CS John Mbadi has set out to explore fresh avenues of raising funds to finance the FY24/25 budget.
Mr Mbadi has announced that his ministry is mulling the re-introduction of eco levy among other tax proposals that were contained in the ill-fated Finance Bill 2024 that was rejected in July following public protest.
In an interview with Citizen TV on Sunday, the new Treasury CS said his ministry will now require multinationals to explain why they are opposed to eco levy, one of the contentious proposals contained in the rejected Bill.
“They will tell us why they oppose us because you know, they are in business but we also have an interest as a country. This country is not a dumping place,” Mbadi said.
The CS explained that the levy, which targets products such as technology items and plastic packaging that contribute to environmental pollution, aims at enhancing responsibility in the conduct of business.
Previously, multinationals opposed the introduction of a 10 percent levy on all imported and locally manufactured goods as captured in Finance Bill 2024 arguing that it would make their businesses less sustainable. They threatened to leave the country, noting that the new tax would lower investor trust.
What’s more, they argued that the tax would negatively affect their strategic planning, leading to double taxation for the industry players as they already pay fees to a Producer Responsibility Organisation under the the Sustainable Waste Management Act of 2022.
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“We are saying that if you are injurious to the environment, then you must pay for helping make good the harm that you have caused,” Mbadi added.
However, the CS cautioned that conflicting issues such as slapping the levy on bread packaging and sanitary pads would be taken into consideration.
“Eco levy has some meanings; we will just make sure that they are levied on those items which pollute the environment. In eco levy, we will target those areas that will not affect the common mwananchi (citizens),” he said.
Additionally, the CS said that the eco levy was just the beginning as some of an estimated 49 proposals contained in the rejected Finance Bill 2024 that may resurface in the new amendments under preparation by the National Treasury.
Why manufacturers opposed eco levy
Under the Finance Bill 2024, eco-levy was introduced as an environmental tax aimed at both manufacturers and importers of select products. The new levy envisioned the setting up of waste management infrastructure, as well as the funding of the country’s sustainable waste management programme.
At the same time, eco levy was meant to develop material recovery facilities and electronics waste collection centres across 47 counties.
According to a note by the Kenya Association of Manufacturers (KAM), the industrialists faulted the envisaged tax, stating, “eco levy will not only duplicate the existing levy mandated under Extended Producer Responsibility (EPRs) schemes, but it will also further reverse Kenya’s initiatives to create a circular economy to manage its waste and become a regional recycling hub through the proposed removal of the incentive to increase investments in recycling of waste products.”
The manufacturers’ lobby further criticized the tax, highlighting that its net effect was to substantially drive up the cost of goods.
“For instance, the Ksh150 levy per kilogram of plastic packaging will increase the cost of a 400 grams loaf of bread by Ksh9 from Ksh65 to Ksh74; increase 1 litre of cooking oil by Ksh16.81 from Ksh300 to Ksh316.81; increase 1 kilogram of power detergent by Ksh30 from Ksh200 to Ksh230,” KAM explained in a statement faulting the charge.
