Govt Moves to Ease Tax Burden as Agriculture Sector Flags Rising Costs

Govt Moves to Ease Tax Burden as Agriculture Sector Flags Rising Costs.

CS Mutahi Kagwe speaking at a high-level forum bringing together government leaders and agricultural sector representatives in Nairobi.

By Jeff Oyugi 

Nairobi - November 18, 2025

Agriculture Cabinet Secretary Mutahi Kagwe on Monday led a high-level engagement between government and agricultural sector representatives, focusing on reducing regulatory bottlenecks, reviewing taxes and levies, improving farmer earnings, and safeguarding Kenya’s competitiveness across value chains.

The breakfast meeting brought together key government actors, including Treasury Principal Secretary Dr. Chris Kiptoo, Agriculture Principal Secretary Dr. Paul Ronoh, Livestock Development Principal Secretary Jonathan Mueke, and Kenya Revenue Authority Commissioner for Micro and Small Taxpayers George Obell. The session aimed at consolidating sector proposals for the upcoming budget cycle and addressing longstanding concerns around taxation, compliance burdens, and high production costs.

Opening the dialogue, CS Kagwe emphasised that the government’s priority was ensuring farmers earn more from their labour and that regulatory frameworks support, rather than hinder, agricultural productivity. He called for clear, concise submissions that highlight actionable reforms.

“We are here to understand the current situation and what changes will genuinely raise farmer incomes,” he said. “If a regulator charges a levy, then there must be a corresponding service. If no service is being provided, it makes no sense to charge.”

Kagwe urged value chain actors to avoid lengthy histories and instead present specific, measurable proposals that balance sector needs with government revenue demands. He noted that while many players request tax waivers, the Treasury must still finance national priorities. “If something is to be removed, show us how its impact will be recovered elsewhere,” he said.

Agriculture PS Dr. Paul Ronoh affirmed that the ministry was committed to improving efficiency across value chains but recognised that escalating regulatory charges had undermined sector growth. He said the ministry had already noted rising fertiliser blending challenges, inconsistencies in input taxation, and barriers affecting seedling propagation and extension support.

“The issues raised here are not new, and many are already under review,” he said. “Our commitment is to align all agricultural interventions to ensure they lower production costs and strengthen farmer-linked value chains.”

Ronoh added that the ministry had identified significant gaps in the supply of certified seedlings particularly in coffee and was working on mechanisms to fund the expansion of seed production and research institutions. He also backed calls to ensure that private sector distributors are integrated into subsidised fertiliser distribution, saying this would enhance reach and accountability.

Livestock PS Jonathan Mueke highlighted concerns from pastoral and livestock-exporting communities regarding charges at exit points, port fees, and the impact of new tax classifications on animal sourcing and aggregation processes. He said the ministry had documented industry constraints, including high cess fees, duplicative county permits and compliance obligations that made Kenya less competitive than regional peers.

“Livestock producers and exporters are dealing with layers of charges that undermine their margins,” Mueke said. “We are reviewing these issues to ensure policies remain supportive and do not push businesses into informality.”

He added that the ministry was also assessing challenges faced by dairy processors, including high packaging taxes, costly regulatory fees and the burden of enforcing farmer compliance with new tax systems.

Sector representatives shared concerns regarding unpredictable VAT shifts on agricultural inputs, increasing levies imposed by regulators, and high costs associated with packaging materials especially kraft paper, which attracts a 25% excise duty. They noted that restrictions on certain packaging materials had raised production costs, while bilateral trade constraints had negatively affected exports such as flowers, fruits and avocados.

Processors also warned that over-taxation of formal producers was pushing consumers and small traders toward the informal market, raising food safety risks and undermining government revenue. Representatives from tea, dairy, horticulture, macadamia and grains cited escalating county cess fees, inspections, certification charges and new turnover-based levies that cumulatively inflate the cost of doing business.

Treasury PS Dr. Chris Kiptoo acknowledged the breadth of sector challenges but underscored that any policy shifts must be reconciled with Kenya’s limited fiscal space. He said nearly half of all revenue collected now goes toward servicing debt, leaving limited flexibility for additional spending or tax waivers.

“We are operating in a very tight fiscal environment,” Kiptoo said. “Revenues have grown, but expenditures have grown faster. The Treasury must balance the need to support agriculture with the need to keep the country financially stable.”

He noted that Kenya currently incurs over Sh500 billion annually in tax expenditures exemptions, zero-rating and incentive schemes some of which may need review to plug revenue leakages. Kiptoo, however, committed to working with the Ministry of Agriculture to address excessive and duplicative levies imposed by regulatory agencies.

“We will undertake a coordinated review of all levies charged by regulators to assess value for money,” he said. “Where there is scope to reduce or restructure charges, we will do so.”

On concerns over chronic VAT refund delays, Kiptoo said the Treasury was considering a one-off allocation to clear pending refunds, subject to fiscal constraints. He also pledged to support trade negotiations aimed at reducing punitive tariffs in key markets, such as India.

Kenya Revenue Authority Commissioner George Obell addressed the sector’s concerns around eTIMS compliance and tax demands issued to farmers. He assured participants that KRA does not expect smallholder farmers earning below the minimum threshold to pay income tax.

“Taxes are paid on income. If a farmer has not made taxable income, they should not be worried,” he said.

Obell said the authority would intensify nationwide sensitisation to ensure farmers and aggregators understand tax processes. He also noted that KRA was open to sector-specific adjustments where unique challenges exist.

“Our intention is not to punish businesses but to support compliance and bring all eligible taxpayers into the net,” he said.

He added that KRA would work with processors to explore alternatives to direct farmer-level enforcement, acknowledging that some compliance mechanisms were pushing farmers back into informal channels.

CS Kagwe closed the meeting by calling for structured follow-up engagements and urging the Treasury to consider incremental increases in agriculture funding. He stressed that agriculture remains the backbone of the economy and must be supported through predictable, transparent and fair regulation.

“Let us refine these proposals and ensure we move from discussion to action,” he said.