NAKURU, Kenya
Kenyan farmers on Monday warned that charging Value Added Tax (VAT) on agricultural inputs would lead to further increase in food prices even if food items are exempted from the intended VAT Bill 2012.
The Organizations which include the Eastern Africa Grain Council (EAGC), the Parliamentary Committee on Agriculture, the Cereal Growers Association and the Kenya Maize Development Program were addressing the annual Agribusiness Expo that brought together players in the grain and agribusiness sector.
“The government should extend the exemption to agricultural inputs as any additional costs on farm production would still end up being transferred to the consumer,” the various key stakeholders in the agricultural sector said in a joint statement issued after the 2-day meeting in Nakuru, about 200 km northwest of Nairobi.
The government recently backed down on plans to introduce a 16 percent VAT on food items that was proposed in the VAT Bill 2012 following intense pressure from a cross- section of Kenyans.
The EAGC Chairman Judah arap Bett said they welcomed government’s decision to exempt food prices but said this would be meaningless if farm inputs were levied the same tax as farmers would transfer any additional costs to the consumer.
Eastern Africa Grain Council Executive Director Gerald Masila said that the bill contains certain provisions that go against the spirit of the East African Community Common market provisions on taxation.
“The Bill could pose a challenge to efforts to harmonize tax regimes in regional economic bloc,” Masila said. He said that the new tax will lead to a decline in exports earnings due to loss of competitiveness of Kenya’s agricultural products in the global market.
Chairman of the Parliamentary Committee on Agriculture John Mututho who while officially opening the two-day Expo warned the tax would not only double food prices, but would kill agricultural sector as traders in neighboring countries would take advantage to flood our market with cheaper farm produce since they’re not charged the same.
Mututho proposed that government transfers the tax to importers of food products where he was confident government could realize taxes in excess of 1.2 billion U.S. dollars annually. He promised to mobilize his Committee to lobby government to withdraw the proposal.
The stakeholders also called for greater investment in agribusiness saying it had the potential to unlock the door to food security and greater incomes for the country.
The Expo noted that adoption of technology in agribusiness would help improve cultivation techniques, streamline the production chain, improve grain varieties throughout Kenya, encourage pest control, improve food security and soil fertility as well as add value to the agricultural products.
It was however noted that for effective adoption of new technology, smallholder farmers require an enabling institution that will support the provision and promotion of modern practices and approaches that will help farmers improve their livelihood and transform their business.
Agriculture in the East African nation is the mainstay of its economy, and despite this it mainly comprises of subsistence farming which still poses the challenge of feeding the entire nation.
The impact of unpredictable weather, rainfall patterns, floods and drought further exacerbate the constraints within the sector. Officials said it was sad to note that farmers are still struggling with rudimentary agricultural farming methods, resulting in low yields coupled with huge post harvest losses.
Farmers incur losses, both in qualitative and quantitative terms due to improper post harvest handling, lack of up to date market information to make informed decisions and poor storage facilities. In addition, most farmers are not using up to date technology to enhance productivity and improve product handling and storage.
The Expo addressed importance of agribusiness to market access, economic development and food security at large, the impact of changing technologies and business opportunities on agribusiness and the economy, the challenges for increasing agricultural production and maintaining profits in agribusiness in the face of changing policies and the role of the stakeholders in the agribusiness sector in ensuring economic growth and prosperity.
It also examined whether current policies impede or encourage current agribusiness innovation. The involvement of the Ministry of Agriculture in this process will be very beneficial.
Experts say increased use of technology has several benefits including improving cultivation techniques, streamlining the production chain, improving of grain varieties throughout Kenya, encouraging pest control, improving food security, improving soil fertility, adding value to the agricultural products among others.
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