Details of Proposed 5% Farm Produce Tax Causing Storm in Mt. Kenya
Lately, discussions in the political arena have revolved around the proposed Farm Produce Tax, a measure the government aims to implement as part of its revenue strategy.
As outlined in the Medium-Term Revenue Strategy, the government suggests imposing a 5 percent tax on the entire value of agricultural products supplied to cooperatives and other organized entities.
The Treasury-prepared document, led by Cabinet Secretary Njuguna Ndung’u, suggests implementing the tax during the upcoming financial years from 2024/2025 to 2026/2027.
The Treasury clarified that the objective of the tax was to generate funds for government initiatives.
The Treasury also mentioned that the agricultural industry had not been taxed adequately throughout the years.
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“The Kenyan economy remains highly dependent on the agriculture sector, contributing an average of 21.2 per cent of the GDP in 2022 and has the highest employment multiplier in the economy. Despite this, the sector’s contribution to tax revenue is less than 3 percent indicating that the sector is undertaxed.
“The agriculture sector has unique challenges, including being weather dependent, perishability of the produce, the subsistence nature of the sector and inadequate tax literacy which makes the taxation of this sector difficult. In addition, the sector is highly informal, cash-based and characterized by the notion that the incomes generated from the sector are meagre and should not be taxed,” read the strategy report.
Significantly, the government expected opposition from farmers, and the Treasury also presented a plan to deal with the apprehensions.
“To address these challenges, the government will intensify taxpayer education to ensure that taxpayers understand their role in nation-building and the need to pay taxes,” the report added.
The Fallout
The suggested tax has caused a division within the political leadership of Mt Kenya. Specifically, some leaders from the ruling party, including Gatanga MP Edward Muriu, have declared their opposition to the government’s proposal.
The leaders clarified that the proposed tax would have an adverse impact on a significant portion of their followers, as the local economy relies heavily on agriculture.
Certain agricultural products originating from the area comprise avocado, tea, coffee, and milk, among other items.
“As an MP, I can tell there is a problem with this proposal. We are the aggregators; the aggregators should be the farmers. These avocado taxes should be imposed on the consumers. The tax should be carried in by the exporter,” the MP stated.
After the ongoing storm, Deputy President Rigathi Gachagua assured that the government would reconsider the proposal.
Details of Proposed 5% Farm Produce Tax Causing Storm in Mt. Kenya
