Government losing Sh2.5bn in revenue through illegal leather trade, lobby says

By: BRIAN NGUGI

The government could be losing about Sh2.5 billion in revenue every year as rogue traders and customs officials collude to export unprocessed hides and skins, a lobby has claimed.

Tanners Association of Kenya chairman, Robert Njoka said Tuesday that the country’s leather industry is at risk from the illegal trade.

He added that the which unscrupulous traders are also exporting raw leather materials either as damaged materials or under-declare their weight which is against export procedures.

“The law is clear that damaged materials should not be traded in.

“By: declaring the materials as reject, the traders reduce the value of hides.

“Secondly, the traders are under-declaring the weight of the containers,” Mr Njoka says in a protest letter sent to the Cabinet Secretary, National Treasury Mr Henry Rotich, and copied to the Ethics and Anti-corruption Commission (EACC) and the Kenya Revenue Authority (KRA).

Mr Njoka said in the letter seen by the Nation that the situation has led to an acute shortage of raw materials for making leather items in the country.

TANNERIES AFFECTED

As a result, Mr Njoka added, tanneries are operating below capacity and are threatening to lay-off workers in coming weeks should the government not intervene to stop the illegal trade.

“In recent months we have not been able to fully service the contracts as we have not received adequate raw materials.

“We are running at below capacity and if the matter persists we are going to lay down workers in coming weeks,” Mr Njoka said.

He explained that a standard twenty-foot container carries 25 tonnes of raw materials but the unscrupulous traders declare 13 tonnes and Free on Board prices at Sh50 per kilo instead of Sh150, depriving the government of Sh2.5 million per container.

“By: doing this they are able to avoid paying full duty thus depriving the Treasury of revenue of about 65 containers per month which translates to Sh2.5 billion every year.

“These traders are known but seem untouchable as no action has been taken against them,” Mr Njoka said.

Mr Njoka also said some traders are declaring the value of taxation as basic cost of raw hides and skins, avoiding salting, transportation, and various other costs and profit margins in their value chain, contrary to the fact that tax should be paid on invoice cost to the buyer.

The lobby wants the licences of companies involved in tax evasion revoked and the implicated customs officials prosecuted.

It has also recommended that the Kenya Leather Development Council take charge of the export of hides and skins to reduce smuggling that is encouraged by a ready market in Asia.

SOURCE: DAILY NATION