Fresh Produce Exporters, Govt Lock Horns Over Taxation

  • Avocado packed in brown boxes for export
    Avocado packed for export. Source: Facebook
  • The exporters sued  Attorney General, Paul Kihara, and the Ministry of Agriculture in a bid to halt the implementation of a new levy in 2022.

    The Horticulture Directorate intends to impose an additional 0.25 per cent levy in taxes for all agricultural exports.

    The exporters, under the Fresh Produce Consortium of Kenya, Fresh Exporters Association of Kenya, and the Avocado Association of Kenya, have accused the government of making unilateral decisions without involving them.

    They jointly cited that the Horticulture Directorate hurriedly put in place the new requirement and without prior consultation.

    Neatly arranged shelves at The Nairobi Farmers Market
    Neatly arranged shelves at The Nairobi Farmers Market.

    If implemented, the new levy will see exporters remit up to four times what they are paying now in taxation.

    The new levy will increase their taxes from the current annual average of Ksh90 million to Ksh377 million. The exporting bodies have lamented that over 40 per cent of horticulture export firms will be forced to close shop if the levy is actualised.

    Nonetheless, the directorate has defended the move saying that the levy will provide the most needed funding for development projects including setting up a fumigation plant.

    The directorate also argues that the fumigation plant will include hot water plants to refine mangoes before being shipped to their destination markets.

    The exporters, however, argue that there is no defined method under the Regulations for the Ministry of Agriculture and Attorney General’s office to determine the customs value and thereby raise the amount collected in levies.

    The new levy, which became effective at the beginning of the year, is backed by the Crops Act and will be based on the value of the consignment being shipped.

    In January 2020, Kenya's avocado industry was ranked 8th globally. This represents 2.1 per cent of the world’s market share. 59,000 tonnes of the product, mostly grown by small-scale farmers, were shipped out of Kenya.

    By October 2020,  68,000 tonnes of avocados valued at Ksh14 billion were exported to prime destinations. These have been mainly in continental Europe and the Middle East.

    The Avocado Association of Kenya has attributed its success to the use of the latest technology, availability of technical training, consolidation of the production capabilities of small-scale growers as well as easier access to markets.

    Agriculture CS Peter Munya speaks at the National Agriculture Summit at Safari Park Hotel on Wednesday, February 26, 2020
    Agriculture CS Peter Munya speaks at the National Agriculture Summit at Safari Park Hotel on Wednesday, February 26, 2020