Agency calls for tax waiver on tea exports as prices drop

A sharp drop in Kenyan tea prices is causing jitters among stakeholders who now want the government to waive taxes on the green leaf to halt a seven-month free-fall.

Kenya Tea Development Agency (KTDA) has warned if left unchecked, it could significantly hurt the economy.

Speaking at Iriaini Tea Factory in Nyeri, chairman Peter Kanyago asked the government to scrap taxes levied on the green leaf saying the country runs a risk of pricing itself out of business.

The Treasury levies value added tax on local consumption under the new law and tea sector fears instability in Egypt, Pakistan and Afghanistan will call for increased domestic consumption to counter losses in those markets.
Mr Kanyago said subsidies on fertiliser could help encourage the more than 60,000 tea farmers to stick in the sector and avert a possible mass walkout as earnings shrink.

The tea agency noted that Kenya’s tea was the most expensive at the Mombasa auction compared to the rest of East African nations including Uganda, Rwanda, Tanzania and Malawi due to tax charges and high production cost.

“Buyers are going for tea from these countries because they are cheaper than ours,” said Mr Kanyago at weekend. “The government should remove the duty and also set up a stabilisation fund to cushion farmers since tea is a major foreign exchange earner.”

Last year, the government imposed a one per cent ad valorem tax on exported tea raising the price of the produce at the Mombasa port auction.

East Africa Tea Trade Association chairman Peter Kimanga said the tax had compromised the competitiveness of Kenyan tea and given its rivals an upper hand.

“Higher prices have seen buyers bypass Kenyan teas for cheaper ones at the auction,” he said yesterday in a telephone interview.

The levy follows another in 2009 where the government imposed a 0.5 per cent tax on tea destined for Pakistan, Kenya’s largest tea market.
The tax, EATTA says, had little effect on sale of the country’s tea saying the ad valorem tax was the one biting back.

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