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{
    "id": 1554315,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1554315/?format=api",
    "text_counter": 169,
    "type": "speech",
    "speaker_name": "Hon. Kimani Ichung’wah",
    "speaker_title": "",
    "speaker": {
        "id": 1835,
        "legal_name": "Anthony Kimani Ichung'Wah",
        "slug": "anthony-kimani-ichungwah"
    },
    "content": "was undertaken with the express aim of facilitating the local assembly of transformers to reduce the overall cost of electricity supply to the people of Kenya. The implication of this decision is that imported parts of electrical transformers, which fall under this classification of tariff code 8504.90.00, are not subject to excise duty. This was a commendable measure under the Tax Laws. However, during the implementation of the Tax Laws (Amendment) Act of 2024, an issue has now emerged regarding the application of the new excise duty on transformers. As currently structured, the tax applies to all imported transformers, regardless of their assembly status upon arrival. This blanket application undermines the intended protection of local transformer assemblers. Therefore, local transformer assemblers have been left in a quagmire as the classification of this tariff applies a blanket application across all imported parts, regardless of their assembly status. For instance, the tank that carries oil in a transformer is a component that looks complete but is, in fact, just part of the whole transformer. When transformers are transported for assembly, in many instances, they are transported unassembled and then assembly takes place when fixing them. This has created a problem for people importing unassembled parts. In consultation with the National Treasury, we have proposed a small amendment to correct the unintended purpose of the Tax Laws (Amendment) Act of 2024. Hon. Temporary Speaker, importers of components intended for local assembly are the ones facing the unintended consequences of this law. These components are classified as complete transformers despite arriving in a disassembled state. I have given an example of a tank carrying oil, which appears as a complete transformer but is just a component. Under the World Customs Tariff Classifications and the East African Common External Tariff, there is no specific tariff for assembled and unassembled transformers. This absence of differentiation reflects the widely accepted practice that transformers are typically transported in disassembled parts due to their nature and logistical requirements. The current application of the Tax Laws (Amendment) Act of 2024, in conjunction with the existing interpretation rules, presents an unintended consequence that warrants urgent consideration. The excise duty on transformers will increase the cost of supplying electricity to Kenyans, thereby negatively impacting the Government's agenda on the Last Mile Electricity Connectivity. This unintended consequence would mean that the cost of transformers increases by at least 25 per cent of that excise duty imposed under the Tax Laws. This will mean that the Last Mile Connectivity programme, partially funded by the donor community, will become more expensive for the Government. Many Members have seen officials from the Ministry of Energy and even His Excellency the President commissioning projects across the country on Last Mile Connectivity to ensure we connect as many Kenyans as possible to electricity. This will eat up the small resources that have been appropriated towards the Last Mile Connectivity Project and even the funds that are coming from the donors. The Excise Duty (Amendment) Bill of 2025 seeks to address this problem by amending the First Schedule to remove the excise duty on imported, fully assembled electric transformers and parts under the following tariff codes: 8504.10.00, 8504.21.00, 8504.22.00, 8504.23.00, 8504.31.00, 8504.32.00 and 8504.34.00 at the rate of 25 per cent that was introduced last year, as mentioned. In conclusion, I urge Members to support this crucial amendment. It is intended to benefit the end consumer of electricity, which includes all Kenyans. If the Kenya Power, the Kenya Electricity Transmission Company ( KETRACO), and the Rural Electrification and Renewable Energy Corporation (REREC) are buying transformers expensively, that cost will be offloaded to consumers in the tariffs they pay for their electricity consumption. Therefore, it is only right that we support this Bill to achieve the intended goals: protect the local manufacturers or local assemblers of transformers, spur job creation as people manufacture and The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}