The Kenya Flower Council (KFC) has warned that gains made in reviving the horticulture sector in the last couple of months could be wiped out.
This follows the move by the National Treasury to end Covid-19 tax relief measures starting January 1, with corporate tax and Value Added Tax (VAT) set to return to the previous rates.
This, the council noted, spells doom for the second revenue earner, which also employs millions of workers directly and indirectly.
Treasury Cabinet Secretary Ukur Yatani recently announced that the tax relief measures would come to an end with VAT reverting to 16 per cent from 14 per cent, while corporate tax would be at 30 per cent from the current 25 per cent.
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Council Chief Executive Clement Tulezi said the VAT ‘increase’ would have a direct impact on the sector that is still on its knees.
“There were no consultations among top players and in two weeks, we will go back to the old tax regime and this will have a negative effect,” he said.
Tulezi called on Treasury to rethink the decision and suspend the directive for another year, noting that it would have a far-reaching impact on flower exports to the EU.
“We had projected that the sector would fully recover by June 2021 but the move to suspend the Covid-19 tax relief measures and end the stimulus package will hit us negatively,” he said.
Tulezi is, however, optimistic that the sector could recover although the second wave of the pandemic had caused jitters and losses to the farmers.
He said the lockdown in France, Germany and Netherlands among other countries had affected exports with consumers locked indoors. “We are happy that the lockdown has been eased and we expect exports to increase in the coming days despite the tax challenge we are facing,” he said.
Tulezi termed Christmas and Valentine as critical for the sector. “Our hopes on recovery were pegged on the festive season and Valentine but this will change as the old VAT and corporate taxes come to effect on January 1,” he said.