TOR - Economic Impact Assessment on Tax Exemptions for PURE
GOGLA is seeking a consultant and/or firm with expertise in fiscal policy and incentives (Import Duty & VAT tax policy) to help us undertake an indicative economic impact assessment on impact of the application or removal of taxes on Productive Use of Renewable Energy products, particularly on solar PV refrigerators and small-sized off-grid solar PV pumps and irrigation packages.
GOGLA is the global association for the off-grid solar PV energy industry. Established in 2012, GOGLA now represents over 200 members as a neutral, independent, not-for-profit industry association. Its mission is to help its members build sustainable markets, delivering quality, affordable products, and services to as many households, businesses, and communities as possible across the developing world.
Background
Affordability is seen as most critical bottleneck in the off-grid rural sector, with particular relevance to the Productive Uses of Renewable Energy (PURE) appliances, such as solar PV pumps, or solar PV refrigerators, among other appliances or products. Rural and climate vulnerable population in South Sahel African (SSA) face lack of sustainable mechanization means to increase their productivity and improve and diversify their livelihoods. Lack of access to energy or relatively high cost of fuel have impeded them from mechanizing their work and move away from subsistence agriculture.
On the other hand, PURE appliances, such as solar PV pumps or refrigerators, which have proven transformational in rural areas, remain relatively expensive. Tax policies by national governments on those appliances increase the final landing costs for rural customers, increasing the end-user affordability problem.
Taxes do not apply equally to all PURE appliances. For instance, while solar PV panels, solar batteries, or solar PV irrigation kits (i.e., pumps) are exempted from import duty or VAT in Uganda, PV refrigerators, freezers, or cold chambers, are taxed heavily. In the case of Uganda or Kenya, for instance, custom duties, VAT, IRF and other applicable taxes and levies add around 47% to the final cost of a solar PV refrigerator.
The same applies to applicable taxation across different geographies. While Uganda is providing full exemption of taxes on solar PV pumps and irrigation packages (as long as they are shipped in together under the same container and the importer has a waiver submitted by the Ugandan Solar Energy Association - USEA), Kenya applies 16% of VAT plus around 10,5% of local levies and taxes on the solar PV pumps and around 36,5% of taxes on irrigation items (such as sprinklers, et cetera).
Location: Remote
Reporting to: Senior Project Manager Productive Use
Duration: 4 months
Starting: 1st of July 2024
The study:
Objectives of the Assignment:
The purpose of this assignment is to conduct an indicative fiscal and economic impact assessment on the provision of tax exemption for selected PURE technologies. The study is intended to focus on solar PV solar refrigerators and small-sized off-grid solar PV pumps in Kenya.
The fiscal and economic impact assessment will be used by sector stakeholders to engage policy makers in Kenya and support policy changes and tax reforms that can affect a subsequent price reduction of the appliance for end-users and boost the deployment of clean and affordable solutions to the rural, remote, and climate-vulnerable areas of both countries.
Summary of the Assignment
A. Target Results:
A fiscal and economic impact assessment which demonstrates the impact of the provision of tax exemptions i.e. Duty and VAT exemptions on the PURE technologies, particularly with small-sized solar PV pumps (with a size below 2 kwp ) and solar PV refrigerators in Kenya, demonstrating the impact on the accessibility of productive uses of renewable energy products to the most vulnerable populations.
B. Summary of Approach: The consultant will:
Develop an inception report outlining the approach, methodology for the study, the draft outline for the report, and a stakeholder map.
Undertake a literature review accompanied by stakeholder engagement with industry actors to accurately document the existing taxes on solar PV refrigerators and off-grid solar PV pumps in Kenya; review global best practice on taxation for growing sectors, in particular with PURE equipment / determine the key impacts expected from the changes to the tax regime. Share data sets used for the study with GOGLA.
Engage stakeholders to determine the impact of the changes to the different actors accurately documenting impacts along the supply chain.
Undertake a socio-economic impact analysis accurately depicting how the VAT and duty exemptions would impact on stated government targets impacted by expanding the adoption of PURE technologies.
Undertake a preliminary cost benefit analysis depicting how the VAT and duty tax amendments would impact government revenues versus economic benefit realized including in jobs, incomes supported, GDP amongst others.
Develop a preliminary modelling report to be submitted to the consortium partners for consideration.
Develop a concise proposal documenting the position of the industry on the VAT and import duty exemptions for the selected PURE equipment.; The proposal will be utilised for the subsequent PR campaign and influencing of government officials targeting both responsible sector government agencies and the National Treasury.
Scope of Work and Key Tasks
Task 1: Develop an Inception Report
The consultant will develop an inception report outlining the approach they will take to carry out the preliminary fiscal and economic impact assessment.
Present a draft report to the consortium of GOGLA and key partners, i.e., WRI, EECA/POAP, and CLASP, for review and agreement.
Deliverable and Date: Inception report (within 14 days)
Task 2. Undertake economic impact assessment
a. Literature Review
The consultant will undertake a literature review to:
Accurately document the taxes paid by the industry for the importation of off-grid solar PV pumps (solar irrigation systems) and solar PV refrigerators in Kenya.
Review of existing global best practice on taxation and custom duty exemption for the PURE sector (E.g., tax exemption policy in Uganda for solar PV pump and irrigation items).
Review existing off-grid solar PV pumps and solar PV refrigerators data sets used for the study with GOGLA. Support by CLASP will be provided with support provision to the consultant/consultancy company with available data on pumps, irrigation kits, or/and fridges
Deliverable: literature review: Deadline end of month 1
b. Stakeholder consultations
The consultant will engage with key stakeholders along the supply chain (i.e., national renewable energy associations, government authorities – Ministry of Energy and Petroleum, Ministry of Agriculture, Ministry of Industrialisation, Trade and Investments and Ministry of Water and Irrigation -, Kenya Revenue Authority, county governments , PURE companies, , and consortium partners composed of WRI, EECA/POAP, CLASP) to accurately determine how the proposed tax reform may impact the sector and specifically:
Document reduction in costs of PURE products as a result of the VAT and removal of duty.
Document impact on affordability of small-sized solar PV pumps and solar PV refrigerators.
Document impact on achieving food security and/or energy access targets in Kenya.
Determine changes to the consumer base accessing these PURE products.
A comparative analysis with the potential for reduction in tax revenue based on models from industry growth. In particular, for solar PV refrigerators and small-sized solar PV pumps (and irrigation items) in Kenya.
Document total tax and duties collection reduction over the next five years from the regulatory changes. WRI's research, development and impact team will be contacted to receive further guidance and data.
Conduct a comparative analysis of tax to be collected vs total tax foregone from potentially reduced growth of the industry over a five-year period.
Document impacts on PURE industry growth specifically outlining impacts on jobs, incomes, agricultural production, agricultural exports, and the impact on the subsequent tax collected in lieu or import duties. This calculation should bear in mind elements such as a foreign hard currency saved from reduction in fuel (due to reduction in fuel pump usage) and food imports, among others.
Assess a sweet spot on the impact of various duty/tax levels on both government fiscal targets vs adoption and economic impact.
Enrich the draft report with the findings from the stakeholder consultations.
Deliverable: stakeholder consultations: Deadline end of month 3
c. Undertake a preliminary cost benefit analysis
The consultant will clean the data and review all costs identified through the literature review and the stakeholder consultations and compare them with the impacts presented and provide a preliminary cost benefit analysis.
The preliminary cost benefit analysis will take into account different technologies (refrigerators and irrigation kits, i.e., solar pumps) in Kenya, and different potential tax reforms proposed (VAT and import duty, only VAT, only import duty) considering also best practices in other countries.
Enrich the draft report with the preliminary cost benefit analysis.
Deliverable: Preliminary cost benefit analysis: Deadline end of month 4
d. Develop final report and presentation
Present a draft report to the consortium of GOGLA and key partners, i.e., WRI, EECA/POAP, and CLASP, for review and agreement.
Make any proposed changes to the report as may be required and deliver a final report and presentation.
Present the draft report to the Global Productive Uses of Renewable Energy (PURE) group, organized by GOGLA on quarterly basis.
Deliverable: Submit a final report to GOGLA: Deadline end of month 4
Task 3: Develop an industry proposal
The consultant will develop an industry Policy Position Paper (PPP) for review and consideration by the industry. The consultant is expected to draw lessons from existing policy documents and processes, such as the “private sector position and concerns on renewable energy and energy efficiency taxation by UNREEEA”, published in January 2024.
The consultant will present the draft PPP to the consortium for agreement. The consortium will include GOGLA, as well as other international stakeholders and companies, i.e., EECA-POAP, WRI, CLASP, Solar Productive Solutions, and others.
A final PPP will be submitted to GOGLA.
Deliverable An industry PPP on the economic impact of the VAT and import duties amendments on off-grid solar PV pumps and solar PV refrigerators: Deadline end of month 4
Summary of Key Deliverables
Inception report detailing methodology for the study, the draft report outline, and a stakeholder map. Deadline: Within 14 days, Approved by GOGLA.
Preliminary fiscal and economic impact assessment. Deadline: End of Month 3, Approved by GOGLA.
Final policy position paper. Deadline: End of Month 4, Approved by GOGLA.
Support provided by GOGLA and consortium
Support/inputs to be provided by GOGLA and the members of the consortium on the reports, GOGLA and the members of the consortium will provide introductory emails and contact with relevant stakeholders. In addition, WRI will provide technical support via WRI’s research, development, and impact team, and CLASP will provide support to the consultant/consultancy company with available data on pumps, irrigation kits, or/and fridges.
Intellectual property
GOGLA and funders will make the materials available for sharing via its public channels, giving due recognition to the author(s) of the materials, adding basic branding to the various documents and materials as applicable. The consultant will be expected to ensure that the materials prepared are free of any intellectual property rights or grant GOGLA and funders a free licence (for at least three years) to publish them at no cost.
Contracting, Remuneration and Expenses
If applicable, GOGLA shall pay the consultancy fee to the consultant/s as agreed between both the parties by contract agreement. The proposed payment scheme is 30% upon delivery of the inception report, 30% upon delivery and acceptance of the draft report and 40% after submission and acceptance of the final report; both to be delivered to the satisfaction of GOGLA.
Experience in taxation legislation related to solar products and advocating at a national and regional level for VAT and import duty exemptions in the off-grid solar energy space or fiscal policy / measures submissions on behalf of specific as well as with experience in capacity building training. Regionally specific expertise is crucial.
The expert/s should have:
A master’s degree in economics or a related field.
Experience in undertaking regulatory impact assessments, cost benefit analysis or economic impact assessments, with legislation related to VAT and import duties.
Experience in supporting the off-grid solar industry or the renewable energy sector in economic analysis and developing advocacy strategies to secure taxation exemptions within Kenya or another EA region.
Demonstrated competence in the subject matter evidenced by having undertaken a similar assignment.
A firm which has engaged with the National Treasury in Kenya or other EA region country on a taxation issue.
Good communication skills (in writing and verbally) and experience in producing high-quality written content and reports.
Evaluation
The criteria which shall serve as basis for evaluating offers will be:
Technical Qualification weight: 40%
Financial/Price Proposal weight: 30%
Regional Engagement Experience weight: 30%
A two-stage procedure is utilized in evaluating the proposals, with evaluation of the technical proposal being completed prior to any financial/price proposal being compared. The financial/price proposal of the candidates who passed the minimum technical score of 50% in the technical qualification evaluation will be evaluated.
GOGLA Values:
All staff at GOGLA are required to work in line with our organization’s values. This means working boldly, enthusiastically, pro-actively, transparently and collaboratively with each other whilst treating others in a fair and equal way. Please see our website for more details about our values.
Submission of Proposal
Submission package:
Technical proposal / methodology on how they will approach and complete the assignment.
Financial proposal. The financial proposal shall specify a total lump sum amount with a clear break down of costs, and be inclusive of all expenses, taxes, and fees applicable.
Example of work on VAT/duty exemptions within the target countries or similar examples.
Brief description of why the individual(s) considers him/herself/themselves as the most suitable for the assignment.
Personal CV(s), indicating all experience from similar projects or topic area, as well as the contact details (email and telephone number) of the expert(s) and 2-3 professional references.
The proposal must be submitted:
In the English language, and valid for a minimum period of 120 days.
To Carlos Sordo at c.sordo@gogla.org or Brenda Marbaniang at b.marbanian@gogla.org by latest 5PM CET on May 31st, 2024
With a title “PURE_Exemptions_Kenya – application pack by [name of applicant]”
Any questions to this ToR must be submitted:
In the English language
To Carlos Sordo at c.sordo@gogla.org or Brenda Marbaniang at b.marbanian@gogla.org by latest 5PM CET on May 24th, 2024
With a title “PURE_Exemptions_Kenya – question by [name of applicant]”