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Hold on, State tells leather manufacturers on tax cut

By Lee Mwiti | November 14th 2018
Betty Maina, Principal Secretary Ministry of Industry, Trade and Cooperatives speaking during the formal launch of Leather Apex Society Of Kenya. [Wilberforce Okwiri, Standard]

Manufacturers in the leather sector will have to wait longer for the Government to review taxes, which they claim are hurting their business.

Industry Principal Secretary Betty Maina yesterday said it would take at least three years for the Government to consider putting a tax relief on raw materials used in the production of leather products such as bags, shoes, belts and wallets.

In the Finance Act, 2018, the tax status of the materials was moved from exempt to a standard rate of 16 per cent.

But through an industry lobby, the Leather Apex Society of Kenya (LEA), the manufacturers want the materials zero rated.

“Of course we all want the industry to grow. But you understand that in economics, every time there is some value addition in a certain product, that value addition is followed by some tariff escalation,” said Ms Maina, during a forum by LEA.

“There is also the need to spur revenue growth in the Government. Such a review could take like three years.”

The sector could also be facing another tax escalation in what the Government feels could be a necessity to protect the manufacturers by killing the export of wet blue leather.

Wet blue leather refers to a product that has gone through a tannery and processed in such a way that it can be used to produce finished leather products.

Kenya exports 90 per cent of its wet blue leather, which is produced by the 20 tanneries that are in private hands.

But according to Kenya Leather Development Council Chief Executive Isaack Noor, there is a proposal in Government to raise the export duty on wet blue leather from the current 80 per cent to 100 per cent.

Mr Noor, who was speaking at the same forum, revealed that in 2010, the export duty stood at 20 per cent.

“In Ethiopia, the export duty is 150 per cent. Why are we complaining when we put ours at 100 per cent? Ethiopia is doing so well because it has protected its industry by only exporting finished products, not raw materials. It has also banned the import of second-hand shoes,” he said.

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