Kenya is planning to introduce 100 percent import duty on finished tea products in order to promote local processing of domestic tea, a senior government official said on Thursday.
Peter Munya, cabinet secretary of Kenya’s Ministry of Agriculture, told journalists in Nairobi that due to a high tax regime in the tea sector, imported tea is more affordable as compared to locally processed tea.
“The 100 percent tax on all imported teas will therefore encourage local value addition by putting local produce at par with foreign processed tea,” Munya said during the launch of public participation for tea elections regulations under the tea act 2020.
Munya revealed that local processing of tea remains low due to inadequate investments and technology available in the tea processing and packaging fields in the country.
He observed that foreign buyers typically purchase the agricultural produce from the Mombasa tea auction who later process and package it abroad and later resell back to Kenya.
The government official noted that tea is an important crop because it is among the leading foreign exchange earners alongside horticulture, tourism and remittances from the diaspora.
According to the ministry of agriculture, over 90 percent of all tea grown in Kenya is exported in bulk form with little value addition hence denying the East African nation income.
Munya added that tea that is exported as semi-processed does not attract taxes while local value addition faces taxations.
“In fact only tea and coffee attracts value added tax while other crops don’t pay the tax,” he said.
Munya revealed that the government is also fast tracking tax reforms in order to encourage the processing of tea locally in order to create employment opportunities.
He noted that despite the country being a leading exporter of black tea globally, there is relatively low level of domestic consumption. Enditem