Local manufacturers have suffered a blow after Parliament rejected a proposal to introduce higher excise duty on imported furniture.
The National Assembly Committee on Finance and National Planning shot down a plan to impose a 30 percent tax on imported furniture.
Local manufacturers have suffered a blow after Parliament rejected a proposal to introduce higher excise duty on imported furniture in an attempt to spur demand for Kenyan-made ones.
The National Assembly Committee on Finance and National Planning shot down a plan to impose a 30 percent tax on imported furniture which would have made them more costly and less competitive compared to locally manufactured wares.
The committee said that local manufacturers lack the capacity to meet the increase in demand for chairs, beds, and tables that would be occasioned by the increase in prices of imported furniture.
The committee chaired by Gladys Wanga added there is a need to protect wood and furniture that are plugging the gap occasioned by the logging ban in Kenya.
Kiambu MP Jude Njomo had proposed the new tax through the Excise Duty (Amendment) Bill of 2020, saying 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, Value Added Tax of 16 percent, import declaration fee of 3.5 percent, Railway Development Fund (2 percent), corporate and Paye As You Earn, earning the government an estimated Sh3.6 billion in taxes every year. “To put local furniture manufacturers at a competitive advantage, the furniture industry should be looked at wholesomely to identify factors that increase the cost of production in the country,” the committee said in its report on the Bill. The committee cited the import duty on timber that was introduced last year saying that it has locked out many importers from business and instead led to a price rise as the few importers left in the market are passing the cost to buyers.
The National Treasury had backed the Bill at the pre-publication stage but later opposed it, saying that the proposed law was against World Trade Organisation’s policy to use the taxation regime to discriminate against businesses.
Treasury Chief Administrative Secretary Nelson Gaichuhie told Parliament that the proposed law would have been challenged in court on grounds that Kenya was using excise duty to discriminate against other products from the East African Community.
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