Price hikes, job cuts loom after new tax on furniture

Kenya's furniture manufacturers have been slapped with a surprise tax on imported wood-based boards in the new Finance Act that they say was without public participation.

They warn it could reverse years of gains and investments in local furniture production, force higher prices for consumers and threaten jobs.

The Finance Act, 2026, assented to by President William Ruto on Tuesday last week, imposes a 30 per cent tax on imported medium-density fibreboard (MDF), particleboard, plywood and blockboard, which are key raw materials used by furniture manufacturers.

Industry players say the proposal was absent from the published Finance Bill that underwent public participation in April, only appearing later through the Supplementary Order Paper during parliamentary consideration of the Bill on June 18 before being passed on the same day.

"When the Finance Bill was published, there was absolutely nothing relating to MDF, particleboard, plywood or blockboard. As an industry, we therefore had no reason to comment on those products during public participation," one manufacturer said. 

The proposal originated from a consortium of local board producers who submitted a memorandum to the National Assembly’s Committee on Finance and Planning.

The petition presented to the committee during the public participation process is captured in the report on the Finance Bill 2026, in which the local board makers wanted the imposition of a 30 per cent levy on imported wooden boards, timber and timber products. 

This, according to the report, would help address the many challenges that the sector faces, including “trade diversion and tariff arbitrage, disproportionate input costs, asymmetric fiscal incentives and dumping of substandard goods”.

“The tariff intervention will curb predatory import practices and level the market field,” reads the report by the Committee that captures sentiments by the companies that included Comply Industries, Biashara Master Sawmill Ltd, Losogwa Sawmills, Primeply Industries and Brookside Timber.

The committee in its report said it considered the proposal to be progressive and consistent with the government's objective of promoting local manufacturing but recommended that local production capacity first be verified before the measure proceeded.

Furniture manufacturers say neither downstream manufacturers nor the Ministry of Investments, Trade and Industry, which is responsible for industrial development, were consulted before Parliament approved the tax.

They contend that any verification of local manufacturing capacity should have been undertaken by the ministry before Parliament made a final decision.

"There was merit in the proposal, but the committee itself recommended that industry capacity be confirmed before the Second Reading," the manufacturer said. "That verification never happened."

The manufacturers argue that local producers cannot supply either the volumes or the wide range of finishes demanded by the market, forcing furniture makers to continue importing specialised boards despite an existing 35 per cent import duty.

"We don't import because it's cheaper. In fact, imported boards are already significantly more expensive after duties, freight and other import charges. We import because many of the finishes, designs and innovations customers demand simply are not produced locally."

The industry says the tax also undermines a policy direction adopted in 2023, when the government increased taxes on imported finished furniture to encourage local value addition while maintaining access to specialised imported raw materials.

The push for the Made-In-Kenya policy, manufacturers say, triggered significant investment in modern furniture factories and expansion of local production capacity.

"We invested because policy had become predictable. The government encouraged us to manufacture in Kenya and protect local value addition. Now the incentive has effectively been removed."

Industry players argue that the difference between taxes on imported raw materials and finished furniture has now largely disappeared, making imported finished furniture more competitive and weakening incentives to manufacture locally.

"The consumer may now find it cheaper to import finished furniture than have it manufactured locally. That is the exact opposite of what the policy was designed to achieve."

Manufacturers further contend that Parliament's response failed to address the actual concerns raised by local board producers, who had complained primarily about imports from Uganda, alleging abuse of East African Community (EAC) Rules of Origin, under-declaration at border points and inadequate enforcement of quality standards.

Furniture manufacturers say those concerns should have been addressed through customs enforcement rather than a blanket tax applying to all imports.

"If the problem was abuse of EAC Rules of Origin, the law already provides mechanisms for dealing with that. Kenya Revenue Authority can enforce customs rules, while Kenya Bureau of Standards can deal with standards and quality. Those are administrative failures, not reasons to tax every importer,” said the manufacturer. 

The industry also argues that the measure could expose Kenya to disputes under regional trade agreements as it applies broadly to imports from EAC partner States as well as countries trading under the African Continental Free Trade Area.