KENYA – Fresh produce exporters from different counties have criticized the government’s act of imposing tax on exports both at the national and the county level.
The Kenya Fresh Produce Exporters Association (KFPEA) claim that the county taxes are not justified and only add to the cost of doing business and will in turn hurts their competitiveness in the global market.
According to KFPEA CEO, Hosea Machuki, while the national government levies a charge of 0.25% under the Horticultural Crops Regulations 2020, counties also charge cess for the same produce.
“County governments charge cess at the county of origin of the produce. Then we also have the national government charging cess,” said Machuki.
“The law clearly stipulates who is supposed to collect cess from exporters of fresh produce, and it the national government.”
A report by Tegemeo Institute of Agricultural Policy and Development shows that the agricultural sector in Kenya contributes about 25.4% of GDP, supports nearly 80% of the rural population and accounts for 65% of total exports.
But despite the importance of the agricultural sector to the country’s economy and its potential for improving livelihoods, there are various constraints including high and increasing production, marketing, and processing costs including double taxation.
The report highlights that following devolution; county governments introduced various taxes to expand their sources of revenue by charging several fees and levies including produce tax/cess.
“These taxation measures are important revenue sources, but they could also stifle business growth and trade,” states the report.
Producers complain that cess rates are high, arbitrary and change from time to time and unless the challenges are addressed, Kenya’s pole position as a fresh produce exporter could be eroded.
Meanwhile, the fresh produce exporters are also demanding KES 20 billion (USD 131.58 million) from the government as VAT refund.
According to Machuki the KRA cap of KES 10 million (USD 65,790) per company per month is not fair because large companies are owed up to a billion.
“Some of these companies are not able to pay their employees, meet operational costs, or even expand their businesses,” said Machuki, adding that the amount has accumulated for the last five years.
Kenya is a leading exporter of fresh produce, including vegetables, fruits (pineapples, bananas, avocados, and mangoes), and cut flowers.
According to the Central Bank of Kenya, horticultural exports generated revenue of KES 11.36 billion (USD 74.70 million) in 2022.
FPEAK is Kenya’s premier trade association representing growers, exporters, and service providers in the horticulture industry.
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