Budget 2016/17: Increased taxes on used shoes, clothes

Consumers of used garments and shoes will have to pay more for their merchandise after the Government announced an increase in taxes levied on them. An increase of 12 percent for the clothes and 15 per cent for the shoes. While presenting the National Budget in Parliament, yesterday, Amb. Claver Gatete, the minister for finance and economic planning, announced several tax cuts, exemptions and increase on imports from outside the East African region, of which used products entering the local market were mostly affected. Used clothes’ tax will be increased from $0.2 to $2.5 per kilogramme, while taxes on used shoes will increase from $0.2 to $3 per kilogramme. “Taxes on usedd clothes and shoes will increase as a way of supporting locally made products and industries,” Gatete said, adding that the move will actually create more jobs and prevent health risks that come with the used products. Members of Parliament questioned the basis upon which the Government was quick to raise taxes on used clothes and shoes, yet there aren’t enough textile manufacturing industries in the country. “We need to understand clear mechanisms, as to how a conclusion was reached to increase taxes on used clothes; without having textile factories, I am afraid some people might not get enough clothes,” MP Edouard Bamporiki asked. In response, Minister Gatete said it is actually the flooding of used clothes that has hindered the development and growth of the textile industry and that it was just a matter of time before the used clothes and shoes were done away with to open opportunities for investors in textile. “If you have lived in Europe or North America, you actually pay for someone to get rid of some of your used clothes out of your home—what the company does is to put them in a washing machine, iron it, put it in a container and ship it to Africa,” the minister said. “Rather than dumping them in their own country, they are being dumped here. The only cost incurred on used clothes is shipment.” The minister added that such a scenario made it quite hard for new textile products and industries to compete with second-hand textile, due to varying costs of production. The vast market for used garment in the East African region has hampered the growth of textile manufacturing industry and the regions heads of state have vowed to tackle the issue. “East African heads of state agreed there has to be industries that can produce textile, now someone has to take the bull by its horns. Let used clothes go to other regions, because we want our industries to grow,” Gatete said. The EAC agreed that within three years, there should not be any used textile left in the region. “Within three years, we will not just levy taxes, but effect total ban,” Gatete said. The 2016/17 Budget, which is being effected starting July 1, will be implemented under the theme, “Fostering growth while increasing exports and boosting made-in-Rwanda goods and services” Winners in 2016/17 National budget Textiles, garments and leather industry, agriculture export crops, agri-business, construction, livestock, wood industry, minerals, tourism and ICT and trade and investment facilitation, are some of the identified key sectors which will receive favourable taxation policy for fostering economic activity. Consumers of sugar and wheat products will also continue to enjoy reduced prices, due to reduced taxes on the products. Imported sugar weighing less than 70,000 tonnes and wheat will continue to enjoy the tax exemptions. Regarding import substitution, the Government has also selected ‘key sectors’ namely cement, sugar, rice and clothing where it believes local production can reduce current imports while on-going export promotion efforts will be supported by the export promotion fund. “We shall gain from policies at EAC level waiving taxes on road tractors, tank trailers and big commuter transport buses,” Gatete said. Waivers are in the context of Common External Tariffs on imports coming from outside the East African Community bloc. The exemptions and cuts are renewed annually by EAC ministers of finance. Meanwhile, public transport operators also have reason to praise the new Budget following the maintaining of import duty at 10 per cent for buses licensed to carry between 25 and 50 passengers, while those with capacity to transport over 50 passengers remain exempted. The move is further expected to improve the country’s public transport sector, which is still faced by a shortage of public transport service vehicles. Tractors and semi-trailers will remain tax exempted, a move that could fast-track infrastructure development directly in line with the national development agenda. Motor vehicles with capacity between five and 20 tonnes will be taxed at 10 per cent, and those with capacity beyond 20 tonnes will be tax exempt. ***************************** What they say? Augustine Mugemangango, the chairperson of Rwanda Association for the Promotion of Leather and Leather Products, welcomed the idea of encouraging locally-produced brand-new textile, but calls on the government to improve textile skills and avail necessary incentives for textile companies to thrive in Rwanda. “We need training in our field of work and state-of-the-art machines. We are restricted by resources. If these two are sorted, we can be able to provide for the available market,” he added. Jean Paul Ufitinema, a used textile seller in downtown Kigali, said the increase in taxes on second-hand clothes and shoes will deal them a big blow, since it employs a big number of people. Compiled by Dean Karemera editorial@newtimes.co.rw

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Budget 2016/17: Increased taxes on used shoes, clothes