Scrap metal dealers warn of industry collapse over new tax proposal

Scrap metal dealers have appealed to Parliament over proposed changes in the Finance Bill, 2025 that would raise the withholding tax on scrap metal transactions to five per cent, saying the move could cripple the industry and result in mass job losses.

Knight Scrap Metal Dealers Association chairman Evans Ng’ang’a, said the tax proposal threatens to dismantle a vital cottage industry that supports more than a million families and serves as a key supplier of raw materials to Kenya’s steel manufacturing sector.

“This industry is not just about old metal—it's about livelihoods. The proposed five per cent withholding tax will be a nail in the coffin," said Ng’ang’a in a press statement.

"We have already been burdened by heavy licensing fees and a 16 per cent VAT on gross sales. Adding more taxes will devastate small traders and exporters alike.”

The scrap metal trade is deeply embedded in Kenya’s informal economy, with thousands earning a living through the collection, local sales, and export of metal waste.

Beyond employment, Ng’ang’a said the sector contributes foreign exchange earnings through a thriving export market and provides critical raw materials for steel production.

“This is a pillar of Kenya’s industrialisation agenda. We feed the steel mills, we support construction. We help recycle and clean the environment, and now we are being punished for it."

Last year, the government imposed a 1.5 per cent withholding tax on the industry, a move the dealers' association says it accepted without protest, despite the financial strain.

But the proposed hike to five per cent in the 2025 Finance Bill has sparked an uproar with stakeholders.

“We kept quiet then. But this time, we must speak out. This is not just a tax, it’s an existential threat. This will kill jobs and industry,” said Ng’ang’a.

The proposed law, now before Parliament, will also widen the tax net to include foreign scrap metal dealers and offshore suppliers to public agencies.

These non-resident entities will be subject to both VAT and the new withholding tax on any payments they receive for supplying scrap or other goods to State entities.

According to the Bill, “Section 10 of the Income Tax Act is amended in subsection (1), by adding the following new paragraphs immediately after paragraph (k)—(l) supply of goods to a public entity and (m) sale of scrap.”

This would make it mandatory for public institutions and local buyers to deduct tax at source before paying suppliers, making it harder for companies to avoid taxation.

While this measure is aimed at closing loopholes and increasing compliance, Ng’ang’a argues it comes at the cost of legitimate industry players.

“You cannot use a sledgehammer to kill a mosquito. We understand the government needs revenue, but this kind of overreach hurts law-abiding businesses more than the fraudsters,” he said.

Ng’ang’a is now calling on MPs and the National Treasury to review the proposal urgently and open dialogue with stakeholders in the industry.

“We want to be taxed fairly, not strangled. The manufacturing sector depends on us. Our people depend on this work. It’s time the government stopped treating us like criminals and started seeing us as partners in development,” he said.