Paper converters propose tax cuts on imports

By John Oyuke

Players in the paper converting industry have unveiled new proposals in the hope of convincing the Government that imported paper is not a finished product hence it should attract lower import duty.

The industry, with an estimated annual turnover of Sh40 billion, has been lobbying for 10 per cent duty, applicable in the Common Market for Eastern and Southern Africa (Comesa), arguing imported paper and paperboard are intermediate products.

Mr Jaswinder Bedi, chairman of Kenya Association of Manufacturers (Kam) said the Government should gradually reduce duty on imported paper from 25 per cent to 10 per cent.

The industrialists have further proposed to continue paying 25 per cent duty for three years after which the tariff can be reverted to 10 per cent, as per the Comesa classified rates.

They also want the government to reclassify paper as an intermediate product arguing that imported paper is not a finished product but a product that comes between raw materials and finished products.

During a meeting with Industrialisation Permanent Secretary Karanja Kibicho, the converters said duty on imported paper was pegged at between 10 and 15 per cent until 1996 before being raised to protect local investments.

The PS assured them the Ministry would consult other ministries to address the matter.

Kibicho assured the delegation — that represented more than 800 converters in the country — their concerns on imports from Egypt and Tanzania would be addressed.

Paper converters say they compete with imported finished paper from Egypt, which attracts a 10 per cent tariff.

They also asked Government to investigate allegations of massive imports from Tanzania imported at zero per cent duty.

They said levying 25 per cent duty on imported paper for use in their industries was causing them huge losses in business, when imported finished products were coming in at zero per cent duty.

Intermediate goods

According to Comesa regional classification, various grades of paper are classified as intermediate goods and rated at 10 per cent.

The converters noted that there were many grades of paper not locally manufactured as there was no local capacity.

The paper converting industry employs more than 13,000 people and converts approximately 250,000 metric tonnes of paper a year.

Employee numbers are, however, said to be falling sharply by more 3,000 employees in recent years as consumers opt to import finished products duty free.

The country has one large integrated paper mill — Pan Paper — which at its peak only a few years ago used to produce various grades of paper.

Following the collapse of Pan Paper early last year, paper converters have had to import 100 per cent of their raw materials at 25 per cent import duty.

Industry players pointed out they have lost business as consumers migrate to plastics, which are cheaper for packaging.

The Government has invested close to Sh1.5 billion towards the revival of Pan paper, which is expected to resume operations as soon as all the technical and legal issues are sorted.

President Kibaki reopened the paper mill on July 28 last year after two and a half years of closure. The plant, however, ground to a halt after two weeks, when three of the mills failed to function, sending more than 400 employees who had just been recalled back home.

Immediately after that, company completely shut down due to lack of funds for operations and lack of raw materials for production.