Lilian Nyiva
Industry Raises Concerns Over New Tax Measures
Importers and exporters have raised concerns over proposals in the Finance Bill 2026 that would impose a 16 per cent Value Added Tax (VAT) on aircraft spare parts, warning that the move could significantly increase the cost of air freight and undermine Kenya's competitiveness as a regional aviation hub.
Stakeholders argue that the proposed tax changes could increase operational expenses across the aviation and logistics sectors, with the effects likely to be felt throughout the supply chain.
Proposed VAT on Aircraft Spare Parts
The aviation industry has opposed the proposed introduction of a 16 per cent VAT on aircraft spare parts, saying the measure would increase maintenance and operational costs for airlines.
Industry players warn that airlines may be forced to pass the additional costs to customers through higher freight charges and air transport costs. Exporters who depend on air cargo services, particularly those dealing in perishable goods such as flowers, fruits, vegetables and fish, are expected to face increased transportation expenses.
Concerns Over Reintroduction of IDF and RDL
Stakeholders have also objected to the proposed reintroduction of the Import Declaration Fee (IDF) and Railway Development Levy (RDL) on aviation-related imports.
According to importers and exporters, the levies would increase the cost of bringing aircraft parts, equipment and other essential supplies into the country. They argue that the additional charges could make business operations more expensive and reduce efficiency in the logistics sector.
Impact on Trade and Competitiveness
Industry representatives say the proposed tax measures could affect Kenya's position as a key aviation and logistics hub in East Africa.
They caution that higher operating costs may discourage investment in the aviation sector and reduce the country's attractiveness for airline operations, maintenance services and cargo handling activities. Businesses involved in international trade could also face higher costs when importing raw materials or exporting goods to global markets.
Call for Retention of Tax Exemptions
The aviation and business communities are urging Parliament to retain existing tax exemptions on aircraft spare parts and related imports.
They maintain that preserving the exemptions would help keep freight costs manageable, support trade growth and strengthen Kenya's role in regional and international commerce.
Finance Bill 2026 Under Review
The concerns come as Parliament continues to review public submissions on the Finance Bill 2026. Lawmakers are expected to consider recommendations from various sectors before making a final decision on the proposed tax measures.
Industry stakeholders hope the concerns raised during the public participation process will be taken into account to avoid placing additional financial pressure on businesses and consumers.
