Economy

Diaper and apparel makers top winners of Yatani tax cuts

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Workers at Rivatex East Africa Limited factory in Eldoret town. FILE PHOTO | NMG

Baby diaper manufacturers, apparel and electrical part makers, and mobile phone assemblers are among the big winners of this year’s Budget after the Treasury removed import duty on their inputs.

Landlords earning up to Sh15 million per year in rent from their properties also got a tax boost after the Treasury raised the threshold for the 10 percent tax from Sh10 million. Under the law, those earning above this threshold pay a tax of 30 percent.

Treasury Cabinet Secretary Ukur Yatani said the removal of duty is meant to promote local manufacturing of these products, which the country has sufficient capacity to make, thus creating manufacturing jobs.

“In order to support manufacturing of the products locally, all inputs for manufacture of baby diapers will be imported duty-free under East African Community (EAC) Duty Remission Scheme,” said Mr Yatani.

“In addition, to promote local production of new clothing and apparels including fashion and design, inputs used in the textile and apparel sector will be imported duty-free…and in order to stir growth in this sector and encourage local investments, inputs for assembly or manufacture of mobile phones will be imported duty free.”

To protect local producers of electrical parts and accessories, the Treasury is proposing to raise the import duty rate on imports of these products to 35 percent from 25 percent for one year.

The government also retained the duty of 35 percent on imported iron and steel products for an additional year to protect local manufacturers, and that of paper and paper boards, leather and footwear imports at 25 percent for another year.

The EAC also agreed to grant duty remission for imports of raw materials for the manufacture of face masks, sanitiser, ventilators and personal protective equipment, including coveralls and face shields, to combat the spread of Covid-19.

Mr Yatani said that in raising the threshold for rental income to Sh15 million, the Treasury is looking to bring in more landlords into tax compliance, following positive impact under the previous threshold.

“The increase in income bands for rental income that is subject to the lower tax bands will be a welcome relief for landlords who are under pressure to reduce or defer rent payments to help tenants cope with the effects of the Covid-19 pandemic,” said consultancy firm KPMG in a note on the tax changes.

“The proposed change will allow landlords with income between Sh10 million and Sh15 million to access the lower tax rates.”