NAIROBI, Kenya, Oct 9 – The Kenya Association of Manufacturers (KAM) has moved to court to challenge a 433 percent increase in excise duty on imported industrial sugar, warning that the higher tax could raise production costs, threaten jobs and weaken the competitiveness of local manufacturers.
The association has filed a constitutional petition at the Milimani High Court against the State Law Office, the Kenya Revenue Authority (KRA) and two other respondents, challenging the increase introduced under the Finance Act, 2026.
KAM says the duty on imported industrial sugar rose from Sh7.50 per kilogram to Sh40 per kilogram effective July 1, 2026, increasing the cost of a key input for manufacturers that use sugar in their production processes.
The association estimates that the combined taxes and levies on the imported commodity now account for about 90 percent of its cost, insurance and freight (CIF) value, potentially increasing expenses for businesses reliant on imported industrial sugar.
KAM projects that manufacturers could incur an additional Sh6 billion in annual costs, with capacity utilization potentially falling by as much as 50 percent and approximately 3,000 jobs at risk.
“The increase in excise duty from Sh7.50 to Sh40 per kilogram represents a 433 percent rise,” the association argues in its challenge.
“Manufacturers face additional annual costs estimated at Sh6 billion, with capacity utilization potentially declining by up to 50 percent and about 3,000 jobs at risk.”
The association has also raised concerns about regional competitiveness, arguing that manufacturers in Kenya could be disadvantaged against competitors in Uganda and Tanzania, where it says industrial sugar does not attract a similar excise duty.
The dispute comes as manufacturers face pressure to manage input costs while competing for markets across the East African Community (EAC).
Higher production expenses could affect pricing decisions and the ability of Kenyan firms to compete regionally, although the projected impact will depend on individual manufacturers’ reliance on imported sugar and their ability to absorb or pass on the additional costs.
KAM is also challenging the process through which the higher rate was introduced, arguing that there was inadequate public participation before the tax increase took effect.
The High Court certified the application as urgent on October 7, with Justice David Mburu directing the association to serve the petition, application and court directions on the respondents by close of business on October 8.
The respondents have been given seven days from service to file and serve their responses to the application and petition.
The matter is scheduled for mention on October 15 to confirm compliance and issue further directions.
