The tea industry regulator says proceeds from the controversial levy on the exports will boost the sub-sector’s fortunes and downplayed protests by a section of traders and growers who say the tax would affect their competitiveness in key markets.
The Tea Board of Kenya (TBK) on Wednesday said the levy will finance activities like research, infrastructure development and value addition, which are vital for the growth of the industry.
In a statement published yesterday, Sicily Kariuki, the TBK managing director said: “The tea ad valorem levy should therefore not be viewed as punitive or likely to impact the industry negatively as indeed it will be beneficial once invested in the sector.”
The government is embroiled in a dispute with traders and growers over the one per cent levy on the hammer price.
The levy was introduced in February is meant to fund the Tea Research Foundation of Kenya and other TBK programmes.
“Unfortunately, this sector is never allowed to thrive and go to the next level which is developing a tea value addition industry because it comes under constant attack by bureaucratic institutions such as Tea Board, KRA and other government bodies,” the Mombasa County Kenya Chambers of Commerce and Industry chairman James Mureu charged recently.
Traders under the umbrella of the East Africa Tea Trade Association (EATTA) that runs the regional weekly auction in Mombasa said charging the levy on the total customs value would make Kenya tea uncompetitive.
The customs value is usually higher than the hammer price because of other associated costs paid by tea buyers.
Mrs Kariuki said “similar levies and or cess are applicable in tea producing countries including Sri Lanka, India, China and Bangladesh for industry development.” She added that locally industries like sugar and coffee also charge levies to support their development.
Kenya last year earned a record Sh109 billion from tea exports despite a drop in volumes, thanks to high prices and a weaker local currency against the dollar.
The country produced 377 million kilogrammes last year, down five per cent from 399 million kilogrammes in the previous period, when it had earned Sh97 billion.
This year’s industry performance remains uncertain thanks to a strengthening shilling and weather-related shocks on production.
Kenya’s tea production fell 12.9 per cent in the first two months of the year from the same period in 2011 due to hot and dry weather in February and the impact of earlier frost attacks.
Meanwhile tea prices at this week’s auction rose marginally to $3.53 per kg compared to last week’s $3.50, according to the Africa Tea Brokers Ltd.