Members of Parliament have rejected a proposal by the National Treasury to reduce the export promotion and investment levy on specific iron and steel imports, saying the move would hurt local manufacturers and weaken the government’s efforts to boost local production.

The Treasury had proposed to lower the levy on semi-finished iron or non-alloy steel with less than 0.25 percent carbon content from 17.5 percent to 10 percent. It also sought a similar reduction on bars and rods of iron and non-alloy steel.

The export and investment promotion levy is paid by importers on select goods listed under the third schedule of the Miscellaneous Fees and Levies Act when such goods are brought into the country for local use.

If approved, the reduction would have lowered the cost of importing these raw materials, which are widely used by local manufacturers as inputs in production. However, Parliament’s Finance and National Planning Committee dismissed the proposal, warning it would undercut local manufacturers producing the same products.

“The committee observed that the export promotion and investment levy was first imposed in the Finance Bill 2023 during a time when the government policies were indicative of the sheer effort of the government to encourage local manufacturing and cushion the local manufacturing market from an inherently disruptive and unpredictable global market,” the committee said in its report to Parliament.

The lawmakers maintained that the 17.5 percent rate should be retained to continue shielding the local industry from cheaper imports and to support job creation.

“Therefore, there is a need to allow existing tariff rates to be implemented, as its effects may not be felt in the short run. Therefore, reviewing the rates at this time will negate the government’s intention to protect local industry, spur local manufacturing and create jobs,” the committee added.

The Miscellaneous Fees and Levies Act provides that the levy is meant to boost manufacturing, increase exports, create jobs, conserve foreign exchange and promote investments.

The charge applies to goods such as cement clinkers, uncoated kraft paper and paperboard, sacks and bags. However, it does not apply to goods from East African Community partner states that meet EAC rules of origin.

Revenue collected under this levy is paid into a fund managed under the Public Finance Management Act.