Kenya’s agricultural sector, long considered the backbone of the economy, is facing a potential shake-up with the proposed introduction of a 5% withholding tax on farm produce sales. Unveiled by the William Ruto administration as part of its medium-term revenue strategy, the plan has sparked debate and ignited concerns among farmers and industry stakeholders.
The proposed tax, aimed at widening the tax net and boosting government revenue, would require farmers to pay 5 shillings for every 100 shillings earned from selling their produce through cooperatives or other organized groups. Supporters of the plan argue that the agricultural sector remains under-taxed despite its significant contribution to the GDP and employment. They believe the levy will generate much-needed resources for crucial initiatives, including infrastructure development and social programs.
However, the proposal has met with strong opposition from farmer organizations and agricultural experts. They warn that the additional tax burden could discourage production, reduce profit margins, and ultimately lead to higher food prices for consumers.
Concerns have also been raised about the feasibility of implementing the tax efficiently, particularly given the informal nature of many agricultural transactions.”This tax could be the final nail in the coffin for small-scale farmers,” remarked James Maina, chairman of the National Farmers’ Union. “We are already struggling with rising input costs and low returns, and adding another layer of taxation will only worsen our situation.”
Some have suggested alternative approaches to boost agricultural revenue, such as improving tax compliance in the sector and focusing on value-added taxation at processing and retail stages. The government has assured farmers that their concerns will be addressed and that consultations with stakeholders will be conducted before finalizing the tax plan.
