Cane farmers demand withdrawal of double levies on sugar

Double tax on imported sugar will not cushion the sugar industry but instead will perpetuate corruption in the customs office.

According to an economist, the government erred by drastically increasing import tax on sugar.

The tax, which was imposed on imported sugar by Treasury Cabinet Secretary Henry Rotich, may have acted to motivate sugar barons to buy more of the commodity, said Mr Kwame Owino, of the Institute of Economic Affairs, during a public forum on the budget held Friday.

“The government almost admitted that there is illegal sugar importation … What the tax did was to create a greater incentive for sugar importers to actually do that,” said Mr Owino.

During the recent budget reading, the Cabinet secretary stated that the government had increased duty on imported sugar from Sh19,600 to Sh45,080 (current exchange rate) so as "to protect the sugar industry" bearing in mind that sugar factories in the country are almost collapsing.

“The advalorem rate remains 100 per cent of the customs value. This measure will cushion the sugar sector from unfair competition and enable our local factories to break even and pay the farmers promptly,” said Mr Rotich in his presentation to the National Assembly last week.

The farmers, through their lobby groups the Sugar Campaign for Change (Sucam) and the Kenya National Federation of Sugarcane Farmers, on Thursday said the duties that existed before the enactment of this tax had never been effected.

The farmers said the tax levies, which would see importers pay an extra $260 (Sh25,391) per tonne in specific duty rate, will still be evaded by barons benefiting from illegal sugar imports.

Sucam national coordinator Michael Arum said the barons have been using Comesa member states to import subsidized sugar from the international sugar market to evade this tax.

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“It was just a wrong move in terms of policy effectiveness. It has been proven that for the last 20 years it does not help our local industry. It may just be a measure intended to raise more funds, the barons too have an opportunity to corrupt the revenue officers to import the commodity without paying any taxes. It is lose-lose situation,” said Mr Owino.

In addition, the gap in prices of locally manufactured sugar and the imported commodity is too wide and businessmen would rather import than buy locally manufactured sugar, he said and added that the government should instead focus on reforming the sector to cushion farmers and other stakeholders in the industry.

At the same time, he lauded the government for tax exemption on companies offering training to young people.

However, he said, the government failed to include smaller companies that cannot afford to train 10 fresh graduates for a period of six to twelve months on the tax rebate scheme for employers.