Government owes flower farmers Sh12b in VAT refunds, lobby says

Kenya Flower Council Chairman Richard Fernandes (centre) explains a point to CEO Clement Tulezi and Agricultural Food Authority Director General Willis Audi during the International Flower Trade Expo. [Wilberforce Okwiri, Standard]

The government owes flower farmers over Sh12 billion in value-added tax (VAT) refunds, the Kenya Flower Council (KFC) has said.

This has seen the council petition the Treasury to either pay the refunds or offset some of the taxes that the sector faces to boost production.

The council noted that the new taxes around the Finance Act would have major implications on the sector, adding that this was eroding investor confidence.

According to the Council Chief Executive Officer Clement Tulezi, the floriculture sector, the second foreign exchange earner, faces several challenges and little support from the government.

He noted that since August last year, the government had failed to pay VAT refunds, a move that had affected farmers across the country.

"The government owes us over Sh12 billion in VAT refunds, and this has a major impact on production and expansion plans," he said.

Tulezi added that they had engaged KRA without any success, saying they had proposed that the government slashes off some of the taxes for the farmers to recoup their losses.

"If the government does not have these funds, we have proposed to the Treasury to instead offset some of the many taxes that farmers are paying," he said. On production, Tulezi said the country was exporting 3,400 tonnes of flowers every week compared to 4,500 tonnes during Valentine's season.

He said the prices of roses in the European market were still low compared to outdoor flowers, adding that the situation had been worsened by high freight charges.

"Currently, we are paying $2.6 for one kilogramme compared to $1.9 for our main competitors in Ethiopia," he said. Speaking over the weekend, Tulezi stated that the 16 per cent VAT introduced in the Finance Act would have major effects on flower growing, with fertiliser prices expected to rise.

"Currently, there is anxiety over the Act as it will introduce new taxes and erode all the gains made in the sector while increasing the cost of production," he said.

Speaking earlier, one of the top farmers Jack Kneppers of Maridadi farm in Naivasha, admitted that the cost of fertiliser had dropped by around eight per cent in the last couple of months.

He noted that though farmers had not yet come out of the woods, there were some positives despite the high cost of production.

"We have seen freight charges start to stabilise in the last two months, demand is high in Europe, and the prices of flowers are reasonably okay," he said.