The country will lose customs taxes totalling Sh10 billion ($100 million) or 0.6%of last year's government revenues once the Africa Continental Free Trade Area (AfCTA) takes effect this year in July, according to a newly released UN report.
$100 million is, however, pocket change and Kenya is set to earn more than ten times that with plenty left to go around once AfCTA becomes a reality.
“There would be a small price to pay once AfCTA is effected as Kenya will lose an estimated tariff revenue loss of 3.2 percent, which is an equivalent of 0.6 percent of the total national revenue,” Dr Andrew Mold, the acting director of UNECA said in Nairobi on Thursday during the launch of the report.
The report produced jointly by the United Nations Economic Commission for Africa (UNECA) and Trademark East Africa (TMEA) shows that East Africa as a whole will earn Sh180 billion in welfare gains and benefits as the successful implementation of free trade deal will create 2 million jobs.
The loss will arise as a result of Kenya, like the rest of 29 countries which have both signed and ratified the AfCFTA Agreement, scrapping of tariffs currently charged on imports in effort to ease movement of goods on the continent. The country made a total tax collection of Sh1.5 trillion in the year to June last year will suffer
Kenya charges import duty of 25 percent on finished goods and 10 percent on intermediate goods as long as they originate from outside the Comesa and East African Community. Products classified as “sensitive” because of available local capacity however attract duty at higher rates between 35 and 100 percent.
Once it's fully operational, the AfCFTA will bring together all 55 member states of the African Union covering a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product (GDP) of more than US$3.4 trillion.