Kenya: KTDA warns against Finance Act 2020, says it may eat income of smallholder tea farmer

The tax imposed under the Finance Act 2020 by the National Treasury will consume the income of smallholder tea farmers, estimated the Kenya Tea Development Agency (KTDA), according to a report by KBC.

It reported that the tea agency has estimated the minimum tax of Kshs.754M per year that is being calculated for the smallholder tea farmers according to the new tax practice that could extract their anticipated gains under the Tea Act of 2018.

The tax that came into effect on 1 January 2020 would eat the gains of smallholder farmers, as per the report.

Adding further, the Management Services Managing Director of KTDA, Alfred Njagi said, "to put this into perspective, the amount is higher by Kshs.20 million the dividend that KTDA Holdings Limited recently declared to its shareholders – the 54 factory companies and by extension the smallholder farmers who own them – for the 2019/2020 Financial Year".

However, the Treasury Cabinet Secretary, Ukur Yatani has indicated earlier that the tax that is been applied on monthly gross turnover at the rate of 1% is to ensure the participation of firms in development in either case if they make a profit or not.

Njagi although added, "the implication of this to KTDA-managed tea factories, using the last financial year's audited accounts, is that they will be, on average, paying over Kshs. 62.8 million each month, in addition to the over 40 taxes and levies they are already remitting to various Government agencies".