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State beats hasty retreat on efforts to tax farmers after protests

Deputy President Rigathi Gachagua and Embu Governor Cecil Mbarire. [DPCS]

The government has hit an about-turn after a backlash over a controversial tax it planned to impose on farm produce.

Deputy President Rigathi Gachagua on Friday said they would review the Finance Act which was overwhelmingly supported by the Kenya Kwanza MPs.

The DP spoke after protests by farmers against the move by the William Ruto administration to tax them.

“On the issue of taxes that were passed by Parliament, we have realised it has some mistakes as it seeks to levy farmers. I have talked to the president and the CS (Njuguna Ndung’u) for Treasury and we shall talk to our MPs.

“We can’t be helping the farmer on one side, and on the other, we are oppressing him. Our government listens and it cares for the farmers,” said Gachagua who spoke in Embu ON Friday during a dairy and fisheries expo.

The Finance Act that introduced the requirement among other controversial proposals such as the contentious housing levy, and increment of the fuel tax from eight to 16 per cent, was signed into law by the president on June 26. It took effect on July 1.

The Bill sailed through parliament after the third reading by Mr Kuria Kimani, the chairman of the National Assembly Finance and National Planning Committee. This introduced various taxes even as the William Ruto administration sought to raise money to fund his government’s first budget.

There were 87 proposed amendments to the Bill, some of which were approved on Tuesday as the National Assembly debated them late into the night.

Except for Githunguri MP Gathoni Wamuchomba, at least 184 MPs - mostly from Kenya Kwanza - supported the Bill, while 88 MPs - mostly from Azimio - opposed the amendments.

In the Act, digital creators will be subject to a five per cent tax while betting and insurance withholding taxes will be charged at 12.5 per cent and 16 per cent, respectively.

The Kenya Kwanza administration defended the Bill saying it would finance the government’s Ksh3.6 trillion budget for the financial year 2023/2024.

The approval of the Bill came after sharp differences between Kenya Kwanza and opposition legislators.

Led by Minority Leader Opiyo Wandayi, the opposition termed the Bill as punitive saying it will be the downfall of the Kenya Kwanza regime.

“If by any chance this clause becomes part of the Bill and the VAT on fuel is increased to 16 per cent, this will be the saddest day in the history of this country. If by any chance this Finance Bill is passed and it becomes an Act of Parliament, that will mark the beginning of the fall of this regime,” Wandayi warned.

Gachagua was responding to a story published by The Standard on Friday on how some lawmakers joined the farmers in opposing a requirement that the growers should have an Electronic Tax Invoice Management System (e-TIMS) before selling their agricultural produce to processors. Gachagua did not state whether the repeal of the Finance Act would touch on other taxes. 

Meanwhile, the DP assured Kenyans the government would clear arrears owed to dairy farmers who supply milk to the New KCC.

He said the government is exploring markets that will see the country export one billion litres of milk annually.

Gachagua said the milk exportation plan and modernisation of the New KCC are part of the government’s Bottom-Up economic model, which will focus on boosting small-scale entrepreneurs and the rural economy.

Gachagua said the government has deployed various strategies to double milk production from the current 5.2 billion litres annually to 10 billion litres by the year 2027.

According to data from the Kenya Dairy Board, Kenyan farmers are currently producing 5.2 billion litres annually (cow 3.9 billion litres, camel milk 920 million, goat milk 273 million and sheep milk 107 million). A total of 2.2 billion litres are sold informally.

The exportation of the milk, the DP said, is also part of the government’s strategy of increasing the foreign exchange earnings from dairy farming.

The deputy president announced that starting this month, dairy farmers will be earning Sh50 per litre of milk supplied to the New KCC.

Gachagua noted that Kenya, being one of the countries with the highest population of livestock in Africa, reviving the leather industry will also reduce the country’s expenditure on importation by over Sh9 billion annually, while employing at least 80,000 people.

[Additional reporting by DPCS] 

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