The Agrochemical Association of Kenya (AAK) has opposed the introduction of 16% VAT on pesticides saying the new tax will raise operation costs for farmers in turn leading to a hike in food prices.
In a statement by chief executive officer Evelyn Lusenaka, AAK said the use of improved agricultural inputs like seed, fertilizers and pesticides are necessary in improving agricultural production, ensuring food security and supporting livelihoods.
According to AAK, players to be affected by the introduction of the new tax include importers, distributors and retailers of both agricultural inputs and produce.
“The introduction of 16% VAT will have the immediate effect of increasing the cost of agricultural production for poor farmers and also higher consumer prices for agricultural produce,” said Lusenaka.
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Pests and diseases contribute from 40% to 100% crop loss if interventions by pesticides are not put in place, Lusenaka said. She thus added that the new VAT poses a serious threat to food security in the country.
“The county has noted emergence and upsurge of new pests such as Fall Army Worm (FAW), Tuta Absoluta among others which pose a threat to food security in Kenya if not controlled,” the AAK CEO said.
In the tax law (Amendment) Act 2018, Agricultural Pest Control Products (PCPs) have been deleted from Second schedule Part A which subsequently subjects all pesticides to 16% VAT.
Lusenaka added that ultimately, there would be compounded adverse effect on the Big 4 agenda and a negative fallout on the country’s GDP.
“The gains so far achieved in the Agriculture sector are likely to be eroded. The move to make the products taxable at 16% will make them more expensive. This may in turn have a direct negative bearing on food security, a key pillar in the Government’s Big 4 Agenda.”
The association urged the government to revert to the old tax regime where VAT on agricultural pest control products was zero-rated.
Agricultural pest control products were exempt from VAT until April 2017 when the VAT status of such products changed to zero-rated.
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The tax law (Amendment) Act 2018, assented by President Uhuru Kenyatta on July 18, has deleted PCPs from Second schedule Part A thus subjecting all pesticides to 16% VAT.
The Kenya Association of Manufacturers has also opposed the move, saying this was unfair on farmers who could only access the new law as from August 1. KAM also argues the law could be applied retroactively as it is effective from July 1 despite President Kenyatta assenting in mid-July.
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