Why State blocked Nassir's plan to collect Sh2.3b levy from port

Mombasa Governor Abdulswamad Shariff Nassir. [Kipsang Joseph, Standard]

The move by Attorney-General Justin Muturi to reject Mombasa County’s plan to impose a levy on cargo passing through the port has thrown a spanner in the works in Governor Abdulswamad Nassir’s hope to raise Sh2.3 billion per year to plug the budget deficit.

In an advisory to the National Treasury, Muturi said it is only the national government that is mandated under Article 209 (1) of the Constitution to impose a duty on imported goods.

The AG said the move was illegal and would lead to double taxation.

 “This has been provided for by the Customs and Exercise Act. Section XI of the Act specifies rates of duty charge on goods imported into the country,” states the opinion dated February 19, this year, seen by The Standard.

Mr Muturi said the imposition of the Mombasa County Port Users Support and Maintenance Levy will be an additional tariff over and above those provided by the Customs and Exercise Act.

This dashes Governor Abdulswamad Nassir’s hope to raise Sh2.3 billion per year to plug the budget deficit blamed on its ballooning workforce and skewed allocation formulae.

According to Mombasa County Finance Bill 2022/2023 draft, Nassir’s administration wanted to charge all imports – local and transit – a new levy.

Nassir has since last year engaged in a charm offensive to lobby top officials in President William Ruto’s regime to sanction his plan to broaden his own source revenue by taxing port users.

Among the proposed levies in the Bill include $5 (Sh650) per imported motor vehicle, $10 (Sh1,300) per container, and $0.5 (Sh65) per metric ton of loose cargo.

In 2021, the Port of Mombasa handled over 1.4 million containers, which means that the county would have collected $14 million (Sh1.8 billion) per year.

Car Importers Association of Kenya (CIAK) chair Peter Otieno said Mombasa handles 135,000 vehicles per year, meaning Mombasa would have collected ($650m) Sh84.5 million.

On loose cargo, the port handled about 900,000 tonnes of conventional cargo per year, and that would have generated Nassir’s administration about Sh585 million.

In total, Mombasa County planned to collect Sh2.3 billion from the port per year.

On January 16, the National Treasury wrote to the AG seeking guidance on Mombasa’s quest to impose the County Port Users Infrastructure Support and Maintenance Levy.

In the letter, the National Treasury objected saying that some of the proposals will harm transport services and the wider economy.

“In this regard, the Ministry (National Treasury) has stated that there is a need for the national government to intervene on the proposed Bill since it is likely to disrupt international port services and international trade at various points of entry,” said Muturi.

He said that the proposed levy will also affect the competitiveness of the Port of Mombasa as the strategic gateway to the Eastern and Central Africa region.

Muturi said Article 209 of the Constitution provides for the powers of the national government and county government to impose taxes and charges.

But Article 209 (3), he said, gives the county governments powers to impose property rates, entertainment taxes, and any other tax that it is authorised to impose by an Act of Parliament.

“On the other hand, Article 209 (1) vests on the National Government’s exclusive powers to impose certain taxes.