Kenyan farmers are set to pay more for pesticides as manufacturers of the chemical or biological agent move to implement Value Added Tax (VAT) on agricultural pest control products after the removal of a tax exemption.
The zero-rated agricultural pest control products have undergone a shift to exempt status in the recent changes to the VAT Act. This will translate to higher prices for customers as the due date set for July 1.
VAT exemption means manufacturers cannot recoup input VAT, and therefore they are forced to factor it in the final price charged to the customer.
“We have no choice but to implement the new tax backdated to July 1, 2018. This could reduce use of chemicals in control of pests causing a drastic drop in food production,” said a statement the manufacturers.
“The 16 per cent VAT on Agricultural Pest Control Products backdated to July 1, 2018 is a big surprise to us since we engaged parliamentary committees of finance and agriculture. We also closely engaged the Treasury but it was all in vain.”
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According to a 2012 survey of pesticide use and application patterns by farmers in Central and Rift Valley regions in Kenya by a group of Jomo Kenyatta university of Agriculture and Technology scholars, about 25-35 per cent loss in agricultural produce is caused by pests and diseases which can be controlled by use of pesticides.
This means that the move will affect thousands of farmers who may not have enough financial effort to purchase the pesticides whose prices are set to increase in a week time.
Maize farmers who have been battling the army worm attack are likely to be big losers in the new tax order, having already chalked up huge expenses in purchasing additional pesticide to fight the worm.
Agriculture in Kenya employs nearly 40 per cent of the total labour force, and contributes about 35 per cent of the country’s GDP.