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Kenya’s Hides, Skins fetch higher export tax
The need to move the country’s leather sector from semi-processed (wet blue) to end-stages of leather processing compelled the Government to revise the export tax on raw hides and skins. The Government has increased export tax on raw hides and skins from 40 percent to 80 percent to encourage value addition.
The new taxation policy is already in force and it’s being implemented through the Kenya Revenue Authority (KRA) which thus levies 80 percent Free on Board (FOB) export tax on behalf of the Government. In addition, the Veterinary Department levies an additional 2 percent of the FOB Value as Veterinary Services Development Fund (VSDF).
However, the export tax on wet blue and crust still remains at 1 percent and 0.5 percent respectively. There are no levies charged on the export of finished leather.
This development was found necessary following a huge deficit of raw materials that hit the country in the recent past due to massive exports of raw hides and skins. As a result, the Government has deemed it wise to push for reforms in the sector which will see a shift to processing of leather to final stages.
In order to move forward, the Government is putting measures into place to encourage players in the industry to indulge in processing of leather into finishing as well as value addition. This is more rewarding than having it at the wet-blue stage, as it is mostly the case. Some of these include; revision of policies on taxation policies, building of capacities of the sector players, creation of markets and export promotions for the country’s leather and leather products,  to name but a few. Existing statistics show that between the years 2009 and 2010, the world’s economy registered more income by trading in finished leather and value added products than in semi-processed (wet blue) and crust leather. For instance, during this period, semi-processed leather fetched USD 3.0 billion while raw hides and skins brought in USD 5.2 billion translating to 3.9 percent and 6.7 percent for the former and latter respectively. On the other hand, crust and finished leather injected a total of USD 10 billion reflected by a percentage of 12.9. Further, the footwear’s contributions stood at USD 47 billion while that of leather goods and products (including gloves) was rated at USD 12.3 billion reflective of 60.6 and 15.9 percentages correspondingly.
Based on the above, it’s worth noting that investors stand to gain much more by embracing value addition. Although Kenya has not taken full advantage of the potential under the sector; indications are that there is still room to explore that line.  The leather industry whose earnings currently stand at Kshs 9 billion has exhibited prospective for growth, a factor attributed to existence of favourable developmental conditions.
 
 
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