By Our Reporter
The agriculture sector is at risk of lowered productivity if the Government does not revert to zero-rated pesticides, according to Evelyn Lusenaka, Chief Executive Officer of the Agrochemical Association of Kenya (AAK).
The organization has opposed the introduction of 16% VAT on pesticides saying the new tax will raise operations costs for farmers, making it even more difficult for them to make pledged contributions to Saccos as savings.
The victim is always the farmer because apart from costs hitting the roof, they still have to cope with reduced credit-rating by Saccos,” argued Lusenaka.
In a press statement, the AAK CEO said the use of modern agricultural inputs like seed, fertilizer and pesticides are necessary in improving agriculture production, ensuring food security and supporting livelihoods. Taxing these products means inaccessibility to the ordinary farmer thus hindering productivity.
According to AAK, other players to be affected by the introduction of the new tax include importers, distributors and retailers of both agricultural inputs and produce.
The retailers and distributors suffer the same fate as the producer. All other links like financial institutions that help move production along the chain will also be adversely affected in provision of services.
“The introduction of 16% VAT will have the immediate effect of increasing the cost of agricultural production for poor farmers and also higher consumer prices for agricultural produce,” said Lusenaka.
Pests and diseases contribute from 40% to 100% crop loss if interventions by pesticides are not put in place, Lusenaka said. She thus added that the new VAT poses a serious threat to food security in the country.
“The county has noted emergence and upsurge of new pests such as Fall Army Worm (FAW), Tuta Absoluta among others which pose a threat to food security in Kenya if not controlled,” the AAK CEO said.
In the tax law (Amendment) Act 2018, Agricultural Pest Control Products (PCPs) have been deleted from Second schedule Part A which subsequently subjects all pesticides to 16% VAT.
Lusenaka added that ultimately, there would be compounded adverse effect on the Big 4 agenda and a negative fallout on the country’s GDP.
“The gains so far achieved in the Agriculture sector are likely to be eroded. The move to make the products taxable at 16% will make them more expensive. This may in turn have a direct negative bearing on food security, a key pillar in the Government’s Big 4 Agenda.”
The association urged the Government to revert to the old tax regime where VAT on agricultural pest control products was zero-rated, which was the case until the new law was assented by President Uhuru Kenyatta on July 18.
The tax law (Amendment) Act 2018 has deleted PCPs from Second schedule Part A thus subjecting all pesticides to 16% VAT.
The Kenya Association of Manufacturers has also opposed the move, saying this was unfair on farmers who could only watch as their crop is devoured by pests due to high costs of inputs as their much trusted financial partners are unable to assist.