Proposed taxes to hit smallholder farmers hard, lobby warns

The National Treasury and Economic Planning Cabinet SecretaryJohn Mbadi during the launch of Economic Survey 2025 when it was revealed that the economy had registered 4.7 growth at the Kenyatta Convention Center, Nairobi on May 6th, 2025. [Standard, Kanyiri Wahito]

The Kenya National Farmers' Federation (KENAFF) has raised the alarm over several proposals in the Finance Bill, 2025, warning that the changes could cripple smallholder farmers and undo recent gains in the agricultural sector.

In a strongly worded statement issued on Wednesday at the Farmers' Conference Centre at Thogoto, Kiambu County, KENAFF National Board Chairman Kaburu M'Ribu urged the government to urgently reconsider tax proposals that threaten the cost of food production and the livelihoods of millions of Kenyan farmers.

The top concern is the proposed removal of VAT exemptions on key agricultural inputs-such as fertilisers, seeds, and pesticides-which are now set to attract a 16 per cent tax.

"This move risks increasing the cost of production at a time when farmers are already grappling with climate shocks, declining yields, and rising input prices," Prof Kaburu said.

Fuel prices are also in the spotlight, with excise duty proposed to rise from Sh21.95 to Sh24.95 per litre.

KENAFF argues this will directly inflate transport costs, making farm operations and market access even more expensive, especially for small-scale producers in remote areas.

The lobby also flagged the reclassification of fertilisers and pest control products from zero-rated to VAT-exempt.

While this might sound harmless, Prof Kaburu warned, it prevents suppliers from claiming input tax, a hidden cost passed on to farmers.

"From increased freight tax on imported inputs to punitive levies on packaging materials for value-added products like tea, the cumulative effect is a blow to both local production and export competitiveness," he said.

While acknowledging the government's allocation of Sh77.7 billion to the agriculture sector and Sh10 billion towards the fertiliser subsidy programme, KENAFF insists that such investments risk being undermined if the Finance Bill proceeds in its current form. Beyond taxation, KENAFF is also pushing for structural reforms in Kenya's agricultural markets, which it says remain fragmented and dominated by middlemen.

"The market is tilted in favour of large-scale, well-financed players while smallholder farmers are stuck in informal, low-return supply chains," Prof Kaburu said.

The lobby also called for a national inclusive agricultural market policy to address issues such as price volatility, lack of market infrastructure, and weak farmer bargaining power.