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Kenya to review tea taxes to boost forex earnings

Kenya to review tea taxes to boost forex earnings

Kenya

Kenya is in the process of reviewing taxes and levies on tea production.

This move comes after industry players and farmers said the current charges are denying them a competitive playing field.

Tea is Kenya’s top foreign exchange earner and the east African nation is the world’s leading exporter of black tea.

If you look at the auction, the price is high but farmers are completely squeezed. The government must find a way of helping the farmers.

Currently, there is a 1 percent levy on tea sold weekly at the country’s tea auction in Mombasa and an additional 16 percent value added tax on tea that is processed and consumed locally.

The port of Mombasa hosts a weekly auction of tea produced in East African countries including Kenya, Uganda, Burundi, Rwanda and Tanzania.

“We have 10 countries which bring their tea to the auction, which is the largest in the world, and out of these countries only Kenya charges a levy, so Kenyan farmers are disadvantaged,” Edward Mudibo, the Managing Director of the East Africa Tea Traders Association, told Reuters.

But other producers do not charge the levy.

The commodity is exported to international markets which include Britain, Afghanistan, Egypt, Sudan and Pakistan. Officials is the sector are also courting Asian markets like China.

Thousands of small scale farmers in the Kenyan highlands depend on the crop for their livelihoods but say they are not benefiting from export of the crop.

They lament over the high costs of labour and fertilizers which hurt earnings and discourage expansion.

“If you look at the auction, the price is high but farmers are completely squeezed. The government must find a way of helping the farmers,” said Josphat Sirma, a farmer.

Kenya earned about $1.24 billion from tea exports in 2015 on output of nearly 400 million kg.

A slightly stronger shilling means officials expect earnings to slip to between 115 billion and 120 billion shillings this year.