Govt urged to remove newly introduced 16% VAT on pesticides

August 24, 2018
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The association said the 16% VAT will ultimately mean an increase in cost of pesticides, which will translate to increase in cost of production for farmers and higher prices for foodstuff/FILE

, NAIROBI, Kenya, Aug 24 – The Agrochemical Association of Kenya (AAK) has opposed the introduction of 16% VAT on Agricultural Pest Control Products, saying the new tax would hurt farmers and consumers alike.

The association said the 16% VAT will ultimately mean an increase in cost of pesticides, which will translate to increase in cost of production for farmers and higher prices for foodstuff.

In a statement by CEO Evelyn Lusenaka, AAK said the use of improved agricultural inputs like seed, fertilizers and pesticides are necessary in improving agricultural production, ensuring food security and supporting livelihoods of value chain players that include importers, distributors and retailers of both agricultural inputs and produce.

“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.

Noting that Pests and diseases contribute from 40% to 100% crop loss if interventions by pesticides are not put in place, Lusenaka said the new VAT poses 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,” she said.

“Fertilizers, insecticides and pesticides alone account for over 50% of the production Gross Margins for many of the agricultural commodity enterprises.”

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, reduced agricultural production, loss/reduced incomes and livelihoods for various value-chain players, increased food insecurity and reduced agricultural sector growth and hence effect on GDP.

She said: “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.

She said: “Favorable taxation of pesticides before the amendment contributed to enhanced affordability of pesticides and increased use of the same thus ensuring improved farm production and reduced post-harvest losses associated with pests and diseases.

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