State commits to settle VAT refunds row between flower farmers and KRA

A worker sorts flowers at the Maridadi flower farm in Naivasha. [Antony Gitonga, Standard]

The government has committed to resolving the Value Added Tax (VAT) refund row affecting flower farmers.

Through the Ministry of Agriculture, the State admitted that it owes farmers while vowing to support the horticulture sector, which earned the country over Sh140 billion last year.

According to the Kenya Flower Council (KFC), the government owes farmers over Sh12 billion, a situation that has adversely affected their operations and expansion plans.

But Agriculture Cabinet Secretary Mithika Linturi was quick to downplay the row, saying the Kenya Revenue Authority (KRA) is looking at the issue on an individual basis.

Speaking during the annual Naivasha Horticulture Trade Fair on Tuesday, Mr Linturi said the impasse would be resolved soon.

The CS lauded plans by KFC to start exporting flowers through the sea to cut the rising airfreight costs.

"The government fully supports this idea, and we are looking for ways farmers can use the Eldoret Airport to export their produce to the EU directly," he said.

Mr Linturi said the second registration of small-scale farmers across the country has kicked off.

"We shall require more data so that we can fully address the issue of subsidies as the government is keen to address the issue of food security," he said.

Major challenge

The Chairman of the Naivasha Trade Fair Richard McConnell noted that farm inputs and the pending VAT refunds remain a major challenge to farmers.

He said although farmers are currently reaping from the high exchange rate, the cost of fertiliser, airfreight and fuel remain a challenge.

"The flower sector is facing double taxation and high power charges, and this affected production, but we hope the government will help resolve this," he said.

Earlier, KFC Chairman Clement Tulezi noted that since August last year, the government had failed to pay VAT refunds, a move that has affected the operations of 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.

Mr Tulezi added that the lobby had unsuccessfully engaged KRA on the issue as well as effecting tax cuts for for the industry.