Kenya Acts On Flower Taxation
The East African Standard, September 24, 2004 - The Government is in the process of streamlining the tax regime for the floriculture industry, an assistant minister disclosed yesterday.
Mr Peter Kaindi of the Ministry of Agriculture said the Government was committed to dealing with the issue of multiple taxation of fresh produce in order to improve their competitiveness in the global market.
"We are working with the ministries of Local Government and Finance to harmonise and rationalise these taxes," he said during the launch of the Sixth Edition of Kenya Flower Council's (KFC) Code of Practice.
The minister described some of the taxes levied by the authorities as either too high or unwarranted. "These taxes certainly add to production and marketing costs thereby weakening the competitiveness of our produce in the world market," he said.
Kenya Flower Council and the Fresh Produce Exporters Association of Kenya (FPEAK) have particularly raised concern over continued taxation of fresh produce by local authorities.
The industry is said to be overburdened with taxes to the point that growers are losing confidence in Government's commitment to growth of the sector that accounts for nearly 20 percent of the country's foreign exchange earnings.
The levies charged include registration fees paid to the Directorate of Occupational Health and Safety, duty on imported goods such as fertiliser and pesticides that is paid to the Directorate of Industrial Training, water permit fees, electricity tariffs, and Horticultural Crops Development Authority and Local Authority cess.
In addition, the new legislation that provides for the levying of Value Added Tax on planting materials has increased the cost of inputs in the sector.
Though the industry's inputs are zero-rated, there is concern over delay in reimbursements. This, the farmers say, has adversely affected cash flows in many flower-growing companies.
Though the floriculture industry does not receive any services from the Kenya Bureau of Standards (KBS), growers are nevertheless levied by the organisation through the Commissioner of VAT. Under this tax regime, medium-sized farms are required to pay a backdated fee of more than Sh1.2 million calculated at Sh400,000 per year.
The industry also faces the challenge of complying with North American and European Union (EU) standards on food safety and hygiene, traceability, environmental management and social accountability.
