Agriculture remains a high priority on the Government’s Big 4 Agenda, the blueprint driving Kenya’s development agenda in the period 2018-2022, which places achieving food and nutritional security as one of its core elements. The agriculture sector is also a major source of employment, an earner of foreign exchange, a constant supplier of food security and a market for industrial goods such as pesticides, fertilizers and machinery and equipment.
In measures meant to raise revenue, Treasury has in the Tax Laws (Amendment) Act, 2020 imposed a 14 per cent Value Added Tax (VAT) on farm implements under Plant and machinery of Chapter 84 and 85 used for manufacture of goods. This amendment came into effect on 30th June 2020 and affected implements such as ploughs, harrows, planters, sprayers and harvesters. A spot check on distributors and sellers of these implements reveals that the changes have already been effected and their prices reflect the new Tax. VAT on Tractors other than road tractors for semi-trailers will be effected on 1st July 2021. The aforementioned implements help to lower the cost of production and increase yields.
The government uses tax policies and laws to attract investments, facilitate productivity and sustainable outcomes for farmers, and create a stronger business environment. However the government has to ensure that its tax measures do not impede or create disincentives for the sector.
With this new legislation, it is expected that the cost charged by Mechanization Service Providers (MSP’s) will increase and become less affordable to most farmers. This will greatly NPCK is working with other stakeholders and member associations to lobby for corrective measures.
undermine the efforts made by stakeholders to increase mechanization among farmers in the country. The new tax measures also come at a time when farmers are reeling from devastating effect of floods, locust attacks and the Covid-19 pandemic.