Address farmers' woes before imposing new tax

Farmers drying harvested Maize in Uasin Gishu County on August 31, 2023. [Christopher Kipsang, Standard]

Plans by the government to slap farmers with a five per cent withholding tax could be ill-advised coming at a time when the sector is reeling from a myriad of challenges.

While paying taxes on all income is an obligation for all Kenyans, the government should perhaps slow down on the plan to increase taxes for farmers and first address the major challenges that the sector faces.

The challenges range from the middleman, who is said to make more money than the farmer despite never setting foot on the farm, to the poor infrastructure that includes bad roads and few facilities to enable the sector to reduce post-harvest losses.

It is commendable that the government has started to deal with the so-called cartels in the coffee value chain. The war should be spread to all other crops to ensure that all farmers earn what they deserve.

In justifying the proposed tax measure, the Treasury said the sector is hugely undertaxed. This is despite its huge contribution to the economy as well as being the sector that employs the largest number of Kenyans.

Agriculture accounted for 21.2 per cent of the country's Gross Domestic Product in 2022. It employs about 40 per cent of Kenya's labour force and this proportion goes up in rural areas to 70 per cent.

Despite the major role that the sector plays, the Treasury says its contribution to tax revenues is less than three per cent, an indication that it is undertaxed.

But it is because of the major role that the sector plays that the Treasury should perhaps give the sector a breather and allow it time to fully recover as well as deal with other challenges before imposing the five per cent tax on agricultural produce. This could save jobs and help the government achieve its goal of making Kenya food sufficient and to reduce food imports.

The agriculture sector is emerging from a period of negative growth having been hit by a devastating drought. It is only last year that the sector registered growth, after contracting for two consecutive years in 2022 and 2021.

Other than the harsh weather that farmers have had to grapple with, agriculture - as with other sectors - is reeling from the high cost of doing business.

Among these include the high fuel costs, which have hit all industries but perhaps hit agriculture harder as it relies on fuel not just for delivery of inputs to the farm and the produce to the market, but also to power different farm activities.

Among the risks that might come with the implementation of a higher tax regime include a reduction in production as well as employment. It is something that has been experienced across sectors where higher taxes coupled with the high cost of doing business has resulted in industries laying off staff and freezing hiring on non-critical employees.

A number of companies have also scaled down on production due to reduced demand as consumers cut down on non-essentials. Agriculture should be propped up to enable it to support jobs, other sectors and generally the economy before subjecting it to more taxation.