Fears levy will make Kenya tea lose competitiveness

A proposed law tabled in the Senate is pushing for the re-introduction of the tea development levy, which is likely to make Kenyan tea more expensive in the world market.

The Tea Bill 2018 has recommended the tax scrapped by the Tea Taskforce in 2016, raising stakeholders concern that Kenya will become uncompetitive.

Sponsored by senator of the tea growing Kericho County Aaron Cheruiyot, it proposes a levy not exceeding four percent of the total proceeds from sale of green leaf or tea products.

“The Cabinet Secretary may, by notice in the Gazette, impose on all dealers and processors, a levy to be known as the tea development levy, which may be determined from time to time and in such manner as the Cabinet Secretary may specify in the notice,” reads the Bill.

The revenue is supposed to go into research and administration. The East African Tea Traders Association (EATTA) said re-introduction of the Tea Development levy was ill-advised.

“If at all there has to be any tea development levy, EATTA does not endorse ad valorem taxation but recommends “specific tax” that is based on quantity and arrived at after due consultation with the tea stakeholders,” said EATTA managing director Edward Mudibo. The bill comes at a time when stakeholders have argued that there is no need of tabling more Bills in Parliament to address challenges facing the sector as a lot has been done before with no tangible results.

“Rather than spend time and energy tabling tea bills in Parliament or summoning stakeholders, all that is required is to interrogate these reports and act on the points raised therein,” said Peter Kimanga, a tea packer.

He said several task force reports had identified the challenges the industry faces and ways to mitigate them.

“The Tea task force report of 2007 was comprehensive, identifying short and long-term interventions that would return the industry back to profitability,” he added.

Kenyan tea is amongst the best in the world but reaches consumers in the market after being blended with other teas abroad. It is also used by tea packers to ‘blend-up’ lower quality teas. The government is mulling the introduction of common user tea blending facility in Mombasa to enable the small scale tea traders carry out value addition on the beverage before it is exported.