A worker picks tea at a farm in Kiptagich in Kuresoi-South on May 7, 2025.
MPs are demanding that the government scraps costly taxes and levies in the tea industry, with farmers being worst hit.
The lawmakers complained of the existence of at least 42 levies and taxes in the tea supply chain, from farming, processing, marketing to distribution.
Kirinyaga Senator James Murango said the tea sub-sector is reeling under too many taxes and levies that are causing the suffering of millions of tea farmers in the country.
Kirinyaga Senator James Murango.
The charges include eight taxes collected by the Kenya Revenue Authority, including 30 per cent corporate tax on profit and Value Added Tax (VAT) at 16 percent. There are five annual fees charged by the Agriculture and Food Authority, ranging between Sh2,000 and Sh25,000.
Then there are several levies and licence fees charged by counties (Mombasa) as well as other national government agencies like Kenya Bureau of Standards, Kenya Ports Authority, Kenya Plant Health Inspectorate Service and National Environment Management Authority.
Mr Murango asked National Treasury Cabinet Secretary John Mbadi to provide a breakdown of all taxes and levies imposed throughout the entire tea supply chain.
The legislator also wanted the minister to explain what specific taxation measures the ministry is planning to implement in the 2025/2026 financial year to eliminate double taxation and other unnecessary taxes that overburden farmers and stakeholders in the sector.
Further, Mr Murango asked the CS to outline the challenges faced in previous attempts to eliminate some of the taxes and levies on tea to make the sub-sector more competitive.
“For how long will primary agriculture be taxed? We had agreed that the government would reduce the taxes during my time as Agriculture committee chairperson but nothing has happened,” said Mr Murango.
A worker picks tea at a farm in Nyeri on May 25, 2023.
The tea sub-sector is one of the main contributors to Kenya’s economy, both in terms of foreign exchange earnings and socio-economic development.
The sub-sector is the source of livelihood for millions of smallholder farmers, with the crop grown in Kirinyaga, Kericho, Murang’a, Nyeri, Kiambu, Tharaka-Nithi, Embu, Bomet, Kisii, Nyamira, Kakamega, Vihiga and Trans Nzoia counties.
In 2024, the total earnings from tea amounted to Sh215.2 billion, comprising Sh181.7 billion from exports, Sh18 billion from local sales and Sh15.5 billion from committed stocks.
Mr Mbadi said that tea processing factories’ income is charged corporation tax of 30 per cent, processed tea sold in the domestic market subjected to 16 per cent VAT, as do all packaging materials, including for tea. Further, imported packaging materials attract excise duty at 25 per cent and Import Duty at 35 per cent.
Women at a farm in Kapsabet, Nandi County, carry sacks with tea leaves to a collection centre.
The CS, however, said there is no double taxation in the tea sub-sector, and the government continues to extend to it numerous incentives.
“As far as I know, I have enumerated all the taxes I am aware of but if there are levies that need not to be there, the best thing to do is for the MP to recommend for the levies to be removed,” said Mr Mbadi.
He explained that any tax imposed on tea at any stage of the value chain is equally applicable to other sub-sectors, ensuring a fair and consistent taxation framework across the economy.
“From consultations with the regulators in the tea sub-sector, various actions by various government entities are ongoing to address the burden of the fees or levies in the tea sector. They include reduction in management fee payable by tea factories from 2.5 per cent to 1.5 per cent upon the enactment of the Tea Act, 2020,” he said. This, he explained, saves tea farmers approximately Sh1 billion annually.
Further, he said, Ad Valorem Levy (1 per cent of the customs value of exported tea) was scrapped in 2016, saving farmers approximately Sh900 million annually, thus making Kenya’s tea more competitive in the local and international markets.
The Agricultural Produce Cess (1 per cent of green leaf value), he added, was also scrapped, saving Sh486 million annually and reducing the cost of production.
Workers pick tea at a farm in Kiptagich in Kuresoi-South on May 7, 2025.
Mr Mbadi said the government has extended various tax incentives, including exempting farm inputs such as fertiliser, agricultural services and tractors from VAT. This is in addition to transportation services of unprocessed tea (from farm to factories) as well as unprocessed green tea, being exempted from VAT.
Further, he said, tea supplied for export to tea auction centres is zero-rated, same as locally purchased tea for value addition before exportation.
“Unfortunately, none of these items you have listed has been done to the tea farmers. It is in this financial year that there is an attempt to put Sh3.5 billion to revive ageing tea factories,” said Kericho Senator Aaron Cheruiyot.
