Legal battle brews over new tea levy, directorship

Tea farmers affiliated to Gathuthi Tea Factory in Nyeri on a farm, March 27, 2024. [File, Standard]

Tea sector players have moved to court to challenge new levies introduced by the Tea Board of Kenya (TBK).

In their case filed before High Court Judge Roselyn Aburilli, the nine tea factories have accused the Agriculture Cabinet Secretary Mutahi Kagwe, TBK and Attorney General of imposing illegal taxes. The tea factories battling the State in court are Imenti, Kinoro, Keigoi, Ikumbi, Mununga, Kiamokama, Tebesonik, Kapkatet and Gionchore.

Through their lawyer Geoffrey Imende, the tea firms told the court that CS Mutahi illegally gazetted the new regulations, which took effect on April 25, 2026. Imende said the cabinet secretary and TBK have no powers to introduce taxes, a role he said was bestowed on Parliament.

“The petitioners challenge the Tea (Levy) Regulations 2026 on the ground that Section 53 of the Tea Act, 2020, is unconstitutional, and excessive delegation of legislative authority confers on the Cabinet Secretary an unfettered discretion to impose a levy by gazette notice without prescribed criteria, formula or limits by which the rate is to be determined, and without mandating public participation, equity and proportionality,” argued Imende.

This comes after the High Court in Kisii was asked to consolidate different cases filed by James Migosi, seeking an interpretation of whether directors can hold multiple positions in different tea factories.

Senior lawyer Paul Muite said there was an identical case filed before the High Court in Embu by Joseph Nteere, Mary Wanjiru and Faith, on behalf of the Kenya Smallholders Tea Growers Association (Kestega), which had not been resolved.

The trio sued Enos Njeru, David Ndung’u, Geoffrey Chege, John Mithamo, Eric Kipyegon, Francis Kamotho, Baptista Muriki, Vincent Atei, Phillip Kipkemoi, James Ombasa, James Githinji, and Gatundu South Member of Parliament Gabriel Kagombe.

In this case, Migosi sued Mithamo and TBK, arguing that he could not hold directorship in Ndima Tea Factory.

Muite stated that Misogi had also filed a separate case before the High Court in Kiambu, challenging Kagombe’s directorship in Theta Tea Factory, and another against Vincent Atei Arisi over the Saganyi Tea Factory directorship.

According to Migosi, the alleged duo sitting on different boards was an affront to the rights of 65,000 tea farmers.

The lawyer said the Embu case was before Justice Magare Kizito, while the Kiambu one was filed before Justice Bahati Mwamuye.

They opposed the cases and denied the allegations, arguing that they were strangers to them. They also argued that there were 54 factories which had not been enjoined in the case and would be affected if any of the orders were issued.

Export markets

Back to the levies case, the court heard that on May 1, TBK rolled out the 0.8 per cent levy on all teas destined for export markets and imports.

Each of the containers destined for export markets paid Sh88,000.

The regulation spells punishment for the traders who fail to pay the levy beyond 30 days, with a directive to be recoverable by TBK as a civil debt.

“The tea importers pay a tea levy at the rate of 100 per cent of the import value for any non-Kenyan teas imported from the Export Processing Zone or Special Economic Zone into Kenya for local consumption,” read part of the regulation.

According to TBK, the levy will help revamp and sustain the Tea Research Institute, which has remained grounded.

This was allegedly after an amicable settlement of a case filed in 2020 by the Kenya Tea Development Agency (KTDA) Holdings Ltd. However, the factories argued in court that the new tax would instead hurt Kenya’s competitiveness in the international market.

KTDA Company Secretary Mathew Odero stated that he was involved in the negotiations that led to the withdrawal of the 2020 case.

He said the agreement was that there would be a freeze on the implementation of the Tax Act 2020, including Section 53, which establishes the tea levy.

According to Odero, the six-month grace period was to allow Parliament to review the Act and amend it.

“The review remains incomplete and contrary to the intent and legal effect of the mediation agreement.

The first respondent proceeded to promulgate the Tea (Levy) Regulations 2026 under Section 53 of the Tea Act, 2020, before the completion of the said Parliamentary Review,” he argued.

He argued that Parliament had illegally granted the Executive the green light to determine how much tax the tea sector players ought to pay, without the powers to do so.

“Whereas Parliament may delegate any power by statute to a competent public officer, I verily believe that any such delegation must be strictly circumscribed to ensure the delegated entity does not act arbitrarily, does not act against public interest, is strictly confined to an area of expertise and does not usurp the role or constitutional duty of another state agency, and promotes the rule of law,” argued Odero.

He said that small-scale tea farmers have yet to consult with Parliament.

The tea factories want the court to freeze the implementation of the levy until the case is heard and determined.