Firms win first battle against new tea levies
| January 19th 2021
Multinational tea companies have won the first round of their battle to stop the introduction of levies on their produce after the High Court suspended some sections of the Tea Act.
Justice Anthony Mrima stopped the government from implementing Sections 36, 48 and 53 of the recently enacted Tea Act 2020 until the petition filed by Kenya Tea Growers Association challenging the laws is heard and determined.
“An injunction is hereby issued restraining the Ministry of Agriculture from implementing the disputed sections of the Tea Act pending hearing and determination of the suit,” ruled Mrima.
The law was enacted to provide regulation, development and promotion of the tea industry, with Section 36 stating that all tea processed and manufactured in Kenya for the export market shall be exclusively offered for sale through tea auction.
Section 48 of the Act provides that all tea buyers and exporters shall value add at least 40 per cent of their annual exports while Section 53 establishes a tea levy in which the Ministry of Agriculture has been given the authority to levy additional taxes on tea exports.
The Act was passed by the Senate on December 21 last year after considering amendments proposed by the National Assembly. President Uhuru Kenyatta assented to the Bill on December 23 and it became operational from January 11.
But the Kenya Tea Growers Association, through lawyer Fred Ojiambo, challenged the three sections, arguing that they were illegally inserted by Parliament without considering the plight of tea farmers.
According to the senior counsel, the provisions introduced additional tea levies, which are higher and are likely to drive the privately-owned tea estates out of business and that its implementation is discriminatory against large-scale private companies engaged in tea farming.
“The associations have contracts with foreign companies to export tea and implementing the three sections will mean that they will not be able to fulfil their contractual obligations with the investors and occasion loss to the economy,” said Ojiambo.
He submitted that by channelling all Kenyan tea sales through auction, the Act violates provisions on fair competition, which prohibits restrictive trade practices.
According to Ojiambo, the tea growers’ associations are the biggest employers in the agricultural sector and making them lose their income through restrictive trade practices and additional levies will force them to cut on their employment and render people jobless.
He said the introduction of the 40 per cent value addition to tea sales contravenes the principle of freedom of contract, which dictates that trading parties are free to enter into binding contracts on their own terms without outside interference.
“The value additions will result in increased prices of Kenyan tea and consequently lower the competitive advantage the country has had in regional and international tea markets. It will also result in higher tea productions and drive the companies out of business,” said Ojiambo.
He argued that the provisions are not compatible with principles of good governance since they were not subjected to public participation to ascertain their implications on the tea growing and production sector.
Justice Mrima directed the Attorney General and the Ministry of Agriculture to file their responses within 14 days.
The case will be heard on February 22.
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