Fresh produce exporters have criticised what they term as double taxation at the national and county level.
Fresh Produce Exporters Association of Kenya (FPEAK) chief executive officer Hosea Machuki said while the national government levies a charge of 0.25 percent 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.
He said according to the Crops Act 2013 only the national government is supposed to charge cess for produce destined for the export market.
In an interview with the Star, Machuki said while they have no problem with the national levy but want the counties to stop flouting the law by charging for export produce.
He singled out Meru, Narok, Kajiado and Nyandarua counties as notorious for the double taxation to fresh export producers.
“The law clearly stipulates who is supposed to collect cess from exporters of fresh produce, and it the national government," said Machuki.
A report by Tegemeo Institute of Agricultural Policy and Development shows that the agricultural sector in Kenya contributes about 25.4 percent of GDP, supports nearly 80 percent of the rural population and accounts for 65 percent 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.
Marketing costs have gone up due to high government taxes, among other factors.
The report on the effects of County Cess on Costs and Returns in the Maize and Irish Potatoes Sector in Kenya indicates 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. The need for county governments to raise revenue to deliver services to its people has led to escalation of production cess,” states the report.
Producers complain that cess rates are high, arbitrary and change from time to time.
The research also noted another element of double taxation, where the same product is charged more than once as it is transported across counties.
“Despite such complaints, there is scanty information on modalities of cess collection and its effects on costs and margins in agricultural value chains,” said Tegemeo Institute.
Meanwhile, the fresh produce exporters are also demanding Sh20 billion from the government as VAT refund.
Machuki said the KRA cap of Sh10 million per company per month is not fair because large companies are owed up to a billion.
He said at this rate, it would take up to 9 years to clear the arrears for some large companies.
"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.
He said every day an exporter transacts, or buys cartoons or bags, or whatever one needs to do in the farm, they pay VAT and get a receipt for that.
Machuki said unless the challenges are addressed, Kenya's pole position as a fresh produce exporter could be eroded.
