A Plea for Stability

NAIROBI – Kenya’s agricultural sector, the cornerstone of the national economy, has formally requested a ten-year predictable tax framework from the government, arguing that inconsistent and burdensome fiscal policies are severely undermining its competitiveness and discouraging critical long-term investment. The proposal was a central theme at a high-level sector forum on Tuesday, November 18, 2025, convened by Agriculture Cabinet Secretary Mutahi Kagwe. Industry stakeholders presented a joint memorandum detailing their concerns to National Treasury Principal Secretary Dr. Chris Kiptoo and Council of Governors Chair Ahmed Abdullahi.

The Crushing Weight of Unpredictability and Debt

At the heart of the sector's grievances are fluctuating Value Added Tax (VAT) rules, a colossal backlog of delayed tax refunds, and a complex web of regulatory levies that distort production costs and choke cash flow for farmers and processors. Stakeholders reported that pending VAT refunds owed by the government to agribusinesses have ballooned to over Sh150 billion. This massive liquidity crunch has forced numerous firms to scale down operations, while others have shut down completely, unable to sustain their working capital.

To address this urgent crisis, the sector has proposed a one-off settlement of the outstanding refunds through a special government bond. Responding to the proposal, Treasury PS Chris Kiptoo acknowledged the severity of the issue and confirmed the government is considering this measure. “As we work on the harmonization of tax, we are also considering a one-off payment of VAT refunds alongside pending bills to ensure that industries do not close down,” Dr. Kiptoo stated at the forum.

Compounded by High Costs and Regional Disadvantage

The industry memorandum also highlighted several other cost drivers that are eroding Kenya's market position. Exorbitant taxes on essential packaging materials, such as Kraft paper, were cited as a major impediment. Some of these duties and levies can accumulate to as high as 60 percent, making Kenyan goods significantly more expensive on both domestic and international shelves. This directly impacts the country's ability to compete with regional rivals like Uganda and Tanzania, whose products often face lower tariffs in key export destinations. Players specifically noted losing market share in India due to these tariff disparities.

The forum also served as a platform for farmers to voice their anxieties over the aggressive rollout of the Electronic Tax Invoice Management System (E-TIMS). While intended to enhance tax visibility, stakeholders warned that many farmers, particularly smallholders, cannot meet the stringent documentation requirements. They fear that rigid enforcement could inadvertently push more agricultural trade into informal channels, thereby undermining the system's primary objective and disrupting organized value chains.

Government Acknowledges Need for Reform

The government representatives present at the forum showed a willingness to engage with the sector's concerns. PS Kiptoo assured stakeholders that their proposals would be factored into the national budgeting process and reaffirmed the state's commitment to creating a more predictable tax environment. He also pointedly addressed the issue of regulatory levies, stating, “The issue here is not so much about the levies but the services that regulators deliver for the levies they charge,” signaling a potential review of the value-for-money offered by various state agencies.

Council of Governors Chair Ahmed Abdullahi acknowledged enforcement weaknesses at the county level, including the persistent problem of illegal cross-county cess charges, which add another layer of costs for transporting produce. Agriculture CS Mutahi Kagwe committed to escalating the unresolved issues, particularly the VAT backlog, to the Cabinet for higher-level intervention. He also challenged the sector to innovate, urging the adoption of technology and AI-driven tools to boost productivity on Kenya's finite land resources.

The Way Forward for Kenya's Economic Backbone

The call for a decade of tax stability is more than a plea for relief; it is a strategic demand for the policy certainty required to attract and sustain the large-scale investment needed to modernize and grow Kenya's most vital sector. Agriculture remains the largest contributor to Kenya's GDP and the biggest employer for its rural population. The successful implementation of a stable and supportive fiscal framework is therefore critical not only for the survival of agribusinesses but for Kenya's overall economic resilience, food security, and its long-term development goals.