Nairobi: The government is set to earn more than Sh1 billion annually from traders in the tea sector with the introduction of a one per cent levy on tea exports and imports. Agriculture minister Sally Kosgei, who is pushing for the levy, is yet to announce the date when it will take effect in what is expected to hurt the earnings of tea companies like Williamson Tea and Kapchorua.
Earnings from tea exports grew 11 per cent last year to a record Sh109 billion helped by the weak shilling and high international prices that offset a drop in production—meaning that Government will raise more than Sh1 billion from the sector.
“The minister imposes an ad valorem levy payable at the rate of one per cent of the customs value for made tea exports or imports,” read part of the regulations.
The new tax will however not be applied to tea imported into Kenya for blending and re-export. Tea firms have raised complaints against the tax which they say will add to their rising production costs when production is falling due to unfavourable weather.
Williamson Tea and Kapchorua are some of the growers whose performance has come under pressure from lower rainfall, rising staff costs and introduction of new regulatory charges.
They will be expected to pay fees to the Kenya Bureau of Standards (Kebs), the Water Resources Management Authority (WRMA) and the National Environment Management Authority (Nema).
“The cost of doing business in Kenya continues to rise,” Nigel Sandys-Lemsdaine, the chairman of both Williamson and Kapchorua, said in a statement, citing rising wages and prices of key inputs such as electricity and fertiliser.
The levy introduced by the minister will add impetus to tea firms’ intentions to automate their processes and lower staff costs.
Tea exporters who fail to pay the tax face a fine not exceeding five hundred thousand shillings or imprisonment for a term not exceeding two years or both.
The regulations however come at a time when earnings from tea –Kenya’s lead export – have risen to new heights, signalling higher revenues for the government with the new tax.
The increase is largely due to auction prices stabilising at $2.99 or Sh269 per kilogramme, which offset a five per cent drop in output.
