Tea export levy raises concerns among growers

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The rollout of a new export levy on Kenyan tea has triggered concerns across the value chain, with stakeholders warning of its huge consequences on the sector.

They also questioned the legality of the implementation of the levy by the Tea Board of Kenya (TBK), which has sparked backlash due to a lack of a gazette notice to legitimise it.

This is despite the issuance of a regulation by the Ministry of Agriculture. A section of the dealers maintains that enforcement of the levy without gazettement undermines due process and creates uncertainty in the market. 

On May 1, TBK rolled out the 0.8 per cent levy on all teas destined for export markets and imports, where on Saturday, 20 containers were destined for export markets, each paid for Sh88,000. Officials from the KRA distanced themselves from the policy’s formulation, emphasising that their limited role was the collection of the levy on behalf of the TBK. 

One official, speaking on condition of anonymity, stated that KRA was solely acting as a collection agent and that any clarification should come from the tea regulatory body.

“KRA’s Integrated Customs Management System (ICMS) portal flopped on Saturday, sabotaging the payment after some invoices were issued,” said a source conversant with tea trading. The regulation issued by the Agriculture Cabinet Secretary Mutahi Kagwe on April 1, outlines that the levy will be calculated at 0.8 per cent of the auction value for teas sold through the auction system, or based on customs value for direct exports. 

The regulation spells punishment for the traders if they 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 facilitate the revival and sustain the Tea Research Institute, which has remained grounded. Paul Kamau says beyond legal concerns, the levy’s economic implications will draw criticism, thus the need for the government to ensure the system is clear to avoid legal turbulence.

TBK Chief Executive Willy Mutai says a consent on a court order allowed the tea stakeholders to negotiate effectively once the public participation procedure was done. “We are going to appreciate its impact,” said Mutai.

“There was a public participation forum held on October 14 last year, and all the players entered into a consent agreement,” said Mutai.