Close shave for beauty industry in tax drop plan

Consumers and small businesses in the beauty industry have been given a reprieve after Parliament dropped a new tax set to mask the glitter of the growing market.

In new measures under the Finance Act 2023, the government has been seeking to impose a five percent excise tax on human hair, eyelashes, electrical switches, and artificial nails, in a move that would raise prices of these increasingly used beauty products. .

Critics have argued that the tax would reduce the purchasing power of middle-class and lower-income consumers who have contributed to the growth of the beauty industry.

Tabitha Njoki, a merchant in the downtown area of ​​Nairobi, a thriving market for human hair, eyelashes, switches and artificial nails, said the abolition of the excise tax demonstrates the government’s understanding of the challenges faced by entrepreneurs in the beauty industry.

“It is a convenience. However, it is important to understand that our profit margins are not as high as some make it out to be. Human hair prices have really gone up with the dollar increasing in value,” said Martha Wangar, a wig maker in Dubois Road in Nairobi, who is among the hundreds of traders doing Sew bundles of human hair.Create a bulky wig.One bundle of human hair costs between 6,000 shillings, and uses up to three or four bundles.

Had the tax been implemented, we would have had to increase the prices of wigs. This would have placed an additional financial burden on our customers, making our products less expensive and potentially reducing demand,” said Ms. Wangari.

is reading: The World Bank: Tax plans harm purchasing power

However, Esther Ower, a wig maker and other vendor in Dubois, Nairobi, says that despite the House committee’s decision to drop the excise tax, current taxes remain high.

“We must continue to push for policies that support the sustainability and success of small businesses like ours,” she says.

The National Assembly’s Budget and Finance Committee has proposed dropping the tax to allow the industry to recover from the post-Covid recession. Making and importing wigs is now big business, employing thousands of Kenyans.

“It is worth noting that the hair care industry is the easiest industry for many to get into, and therefore it absorbs a lot of people into the workforce either directly or indirectly, such as salons and beauty shops. Haco Industries managing director Mary Ann Musangi said in a previous interview. with The daily business.

Angarwala, Khanna, and Haki Yeto have argued that “taxing beauty products is likely to drive many young men and women out of business because the beauty industry has employed many people, who may be put out of business if customers can no longer afford to serve them.”

The committee stated, “The committee agreed with the proposal to delete Paragraph 43 (a) Paragraph (6) in line with the need to keep beauty products for women at an affordable level.”

Growth in Kenya’s beauty and hair care market has seen imports nearly double in 2021 to Sh52.09m from the previous year, with the sector creating jobs through merchandise and small service providers that have sprung up into major cities.

“Items such as human hair, toupees, false beards, eyebrows, eyelashes and false nails that are considered luxury with inelastic demand have recently grown in Kenyan industry,” said global auditing firm PricewaterhouseCoopers in its analysis.

“Bringing these products into the scope of excise duty will further increase the cost of obtaining these products given that the cost of excise stamps on cosmetic products was recently increased by 317 percent through the Excise Duty (Transferable Goods Management System) Regulations of 2023. “

The Finance Bill 2023 targeted an additional Sh289.3 billion in tax revenue from beauty products, among other measures. The tax was set at five percent.

is reading: Beauty Burden: Wigs, false beards, and eyebrows hit at 5% tax

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