While reading this year’s budget, Treasury Cabinet Secretary Ukur Yatani announced new taxes on motorcycles and imported footwear products effective July 1.
The Cabinet secretary introduced a 15 percent excise duty on motorcycle units as well as a 25 percent import tax on leather and footwear products to bridge the budget deficit in excess of Sh700 billion.
The new tariffs will certainly affect millions who earn their livelihood from boda boda and leather sectors. The new charges also put pressure on the sectors in the midst of tough economic conditions caused by the coronavirus that has disrupted operations.
Currently, a unit of motorcycle attracts about Sh11,000 tariff in Kenya. However, with the new taxes, for instance, a unit of motorbike that cost Sh141,000 will now attract a levy of Sh21,150.
Nakuru Boda Boda Association chairman Samuel Munyiri says the new taxes will stifle the sector as it will increase the cost of acquiring a new motorcycle.
This comes at a time when financial institutions have tightened credit lending to SMEs amid a tough economic environment.
“Of late our members have been complaining of difficulties to acquire loans from banks and saccos, making life more unbearable,” Mr Munyiri adds.
Many Kenyans have embraced boda boda business as it is cheaper to start, requires less regulations to start besides supporting millions of families.
Economic Survey 2020 showed that boda bodas and tuk tuk registration in the past year rose by 22,172 units, defying tough economic times that hit most Kenyans, indicating its dominance in the economy.
Leather importers will also feel the pinch once the 25 percent tax increase goes into effect next month. This will create unfavourable business environment as locally made leather products will fetch low prices.
Zachariah Mwangi who sells imported leather shoes from Turkey as well as China argues that the new taxes will worsen the business environment.
“We will pass the extra cost to buyers, making our products costly and unfavourable among buyers,” he says.
The new taxes, nonetheless, is a boon to manufacturers of local leather products because the new taxes will open new business opportunities for them.
For years, local manufacturers have complained of unfavourable business environment on imported cheap leather products that flooded the market.
In December 2020, the Kenya Bureau of Standards (Kebs) announced a set of nine standards to curb fake footwear and leather products in the country.
The code of practice that guides tanning and grading of leather, introduction of particular specified soles and upper material for children, men and women with a total ban on use of heavy metals and harmful chemical substances in making children shoes.
The new compliance directive means buyers will no longer be duped into buying resin or plastic-based footwear and other products passed on as leather.
“The leather standards will level trade in footwear and leather products produced within member states in the East African community by use of comparable standards. Additionally, they will ensure the quality, fitness for use and safety of the footwear products to the users,” earlier said Kebs managing director Bernard Njiraini.