Ethiopia lifts tax on semi-finished leather export

Teka Gebreyesus

With the aim of boosting the production and export earnings, the country has decided to lift the tax on semi-processed leather exports, the Ministry of Trade and Industry announced.
The government made the decision because the tax imposed on export of semi-finished leather goods some years ago has seriously affected the tanneries and exporters, according to Teka Gebreyesus, State Minister of Trade and Industry who briefed reporters on Wednesday. He stated that as the tax imposed on the sector was huge and identified as the main factor for the country’s failure to increase the foreign currency earnings from the leather industry, the government has decided to lift the tax on export of pickles, white-blue and crest leather products.
As of this week all exporters of semi-finished leather are exempted from tax, according to Teka, who mentioned the starting of execution of the new proclamation 61/2012. It is stated that about 80 percent of skins and hides traders in Ethiopia has left the industry because they are discouraged by the tax. As a result, out of the total of 17 tanneries in Ethiopia five were closed and the remaining have been producing below their capacity. The tax has also discouraged foreign investors from investing in the untapped leather processing and export of Ethiopia.
It is also indicated that though Ethiopia has a huge potential for leather and leather goods products as the country is the leading in the number of cattle, no foreign direct investment was registered over the last seven years. With the aim of utilizing the potential of the sector, now the government is working to establish Leather City Park in Modjo town in Oromia region.
A practitioner in the sector blames the little attention given by the government from power supply to financial provision and limited supply of hard currency.
“The finance provided by the government doesn’t show the real commitment of the government as the industry needs attention with regards to access to finance in order to encourage the industry” said Yared Alemayehu, Manager of Waliya Tannery.
The recent move of the Ministry of Finance in waving the 150 percent tax on semi-finished leather, which had disabled the industry, is taken as the major outcome in the industry.