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Kenya insists extra export tax on raw hides to remain in place
2014/3/20 9:28:36 Source: standardmedia Author:Nicholas Wattathu 点击率:

NAIROBI, KENYA: The Government has defended its recent decision to increase export tax on raw hides and skins to encourage value addition.

Industrialisation and Enterprise Development Cabinet Secretary Adan Mohamed Wednesday maintained that the extra levy would neither be withdrawn nor reviewed downwards as it is part of reforms being championed to improve strong production source of leather materials.

The Government early last year increased export duty on raw hides and skins from 40 per cent to 80 per cent to protect local market from scarcity of leather products.

Further, Government argued the taxation would assist in encouraging value addition.

“Key priority as a Government is to ensure the leather industry has gained out of the local production. By increasing the tax our intention is to ensure the local processing capacity is fully utilised,” said Mohamed.

He said most of the leather products in the past have been exported as raw and wet blue and thus not attracting premium prices in the international market.

He made the remarks during a tour of the Alpharama Limited, a leather factory based in Athi River, in the former Eastern Province. “In this way it will be easier to make the local economic industries more competitive and to a large extent maximise producers’ earnings,” he added.

Currently the industry is earning the country about Sh10 billion out of 10 million hides and skins produced annually. In Kenya, most of the leather sector players comprise of micro, small and medium size entrepreneurs whose production capacity is limited.

According to Kenya Leather Development Council (KLDC), the industry resource base currently stands at 17.5 million cattle, 27.7 million goats, 17.1 million sheep, 3 million camels, 1.8 million donkeys, and 1.83 million pigs.

KLDC acting Chief Executive Officer John Muriuki said the taxation policy is being implemented by Kenya Revenue Authority, which levies 80 per cent Free on Board (FOB) export tax on behalf of the Government.

“Soon we will ask Treasury to increase the duty to 120 per cent so that Kenya can compete at the same level with its peers, like Ethiopia, which is levying 150 per cent on raw hides and skins and 100 per cent on wet blue,” said Mr Muriuki in an interview.

Local Abattoirs

According to the Economic Survey 2013, demand for animal products increased marginally in 2012. Cattle slaughtered in local abattoirs rose from 2.10 million in 2011 to 2.19 million in 2012. Over the same period, the total number of goats and sheep slaughtered increased by 1.5 per cent to stand at 5.92 million compared to 5.8 million recorded in 2011.

Local industry players support the Government’s move to increase the tax, saying it has assisted in optimising processing capacities.

Sambasiva Rao, managing director of Alpharama Ltd said Kenya has the potential to become a net export of leather products.

To ensure quality leather products, he said, the firm is working with industry stakeholders to ensure hides and skins are not damaged.

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