Tax Relief

Furnishings importers obtain a 30 p.c tax break

Market news

Furniture importers receive a 30 percent tax break

Tuesday, May 25, 2021

A ship docks in the port of Mombasa. FILE PHOTO | NMG

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BY JOHN MUTUA
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Summary

  • Local manufacturers have suffered a blow after Parliament rejected a proposal to impose a higher excise duty on imported furniture.
  • The National Assembly’s Finance and National Planning Committee has rejected a plan to impose a 30 percent tax on imported furniture.

Local manufacturers have suffered a blow after Parliament rejected a proposal to impose a higher excise duty on imported furniture to stimulate demand for furniture made in Kenya.

The National Assembly’s Finance and National Planning Committee has rejected a plan to impose a 30 percent tax on imported furniture, making it more expensive and less competitive compared to locally made goods.

The committee said that local manufacturers are unable to meet the increasing demand for chairs, beds and tables caused by the rise in the price of imported furniture.

The committee, chaired by Gladys Wanga, added the need to protect wood and furniture that fill the void created by the logging ban in Kenya.

Kiambu MP Jude Njomo had proposed the new tax through the 2020 Excise Duty (Amendment) Act, stating that it would protect local furniture makers by making imported wood and furniture more expensive.

Furniture importers currently pay an import duty of 35 percent, sales tax of 16 percent, import registration fee of 3.5 percent, a railroad development fund (2 percent), corporations and Paye As You Earn, which makes the government an estimated Sh 3.6 billion in taxes each year . “In order to give local furniture manufacturers a competitive advantage, the furniture industry should be thoroughly researched to identify factors that increase production costs in the country,” the committee said in its report on the bill. The committee cited the import tariff on timber introduced last year on the grounds that it had excluded many importers from the deal and instead led to a price increase as the few importers who remained in the market passed the costs on to buyers.

The National Treasury had already endorsed the draft law in the pre-publication phase, but later opposed it, stating that the proposed law violated the World Trade Organization’s policy of using the tax system to discriminate against companies.

Treasury Chief Administrative Secretary Nelson Gaichuhie told Parliament that the proposed law would have been challenged in court because Kenya had used the excise tax to discriminate against other products from the East African community.

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