The Rwandan government has announced a tax exemption for importation of leather and textile raw materials. The exemption applies to both import duties and Value Added Tax (VAT) and became effective on Friday, December 2.
The announcement is good news for the leather and textile manufacturing industry, which has for long been relying on imported and highly taxed raw materials. Local investors have been paying between 10 and 25 per cent on textile and leather raw materials imported.
The high taxes pushed up the cost of production and consequently the consumers paid more for the finished products like clothes and shoes. However, after the waiver, local manufacturers will be able to import more raw materials in large quantities to be able to manufacture enough textile and leather products to meet the local market demand. It is also a feasible project in line with government’s policy to ban second-hand clothes and footwear products.
Although this move will see government lose billions of francs in taxes that it was getting from leather and textile imports, in the long run it will boost the “Made in Rwanda” campaign.
Now, the ball is in the court of manufacturers. They should produce both quality and quantity to satisfy the local market and eventually tap into the export market.
With the ban on second-hand clothes set to be effected in the next three years, local manufacturers should move fast to ensure that within the next 2 years, there is enough supply on the market.
The exemption is also likely to attract more investors in the leather and textile industry while the increased production will also create more jobs within the sector.
But for the industry players to effectively benefit from this waiver, they should collaborate. Small scale manufacturers and big scale manufacturers must combine efforts to leverage on this tax waiver.
Source: The New Times