Ministry of Agriculture Pushes for Pro-Farmer Tax Reforms in Finance Bill 2025
He emphasized that policies must provide consistent incentives for producers if the country is to improve productivity and support food security.
Ministry of Agriculture submits proposals to amend Finance Bill 2025, aiming to boost competitiveness in Kenya’s agricultural sector through tax reforms. Photo/Parliament of Kenya.
By Robert Assad
The Ministry of Agriculture and Livestock Development has submitted a comprehensive memorandum to the Departmental Committee on Finance and National Planning, seeking amendments to the proposed Finance Bill 2025.
The aim is to make Kenya’s agricultural sector more competitive by reviewing key tax provisions.
According to Dr. Paul Kipronoh Ronoh, Principal Secretary for the State Department for Agriculture, agriculture remains a critical pillar of the Kenyan economy, contributing 21% of the GDP and employing more than 40% of the population.
He emphasized that policies must provide consistent incentives for producers if the country is to improve productivity and support food security.
“Subsidy programs are designed to reduce production costs,” Dr. Ronoh stated. “However, recent VAT Act changes in December 2024—particularly the shift of many zero-rated items to exempt status—have hindered manufacturers from claiming VAT refunds, with costs now being passed on to farmers.”
Key Concerns on Agricultural Inputs and Exports
The ministry is particularly concerned about agricultural inputs such as fertilizers, pest control products, and packaging materials for export crops like tea and coffee. These items, once zero-rated, have now become exempt, raising production costs.
“Only 5% of Kenya’s tea exports are in value-added packaging under 3kg. The rest—95%—are exported in bulk over 60kg,” Dr. Ronoh told the committee. “High taxes on tea and packaging materials make Kenyan tea uncompetitive globally.”
He warned that making pest control product inputs exempt from VAT will also increase local production costs and may encourage the entry of counterfeit agricultural chemicals—posing risks to both the economy and public health.
Proposed Amendments to Finance Bill 2025
Dr. Ronoh has proposed several changes:
Move Clause 36 provisions (inputs for animal feed, sugarcane transport, and tea/coffee packaging) into Clause 37 to maintain zero-rated VAT status.
Reinstate Paragraph 21 in Clause 37, which had removed sugar transport from farms to mills as a zero-rated item.
Reclassify tea as a food item to enable zero-rating from VAT.
Increase import duty for packed and bulk tea from 25% to 100% or introduce a specific levy.
Review VAT, excise duty, import duty, IDF, and RDL on locally consumed teas and related packaging.
Harmonize branding levies between county and national governments.
Lawmakers Respond
Committee Chair Hon. Kuria Kimani acknowledged the importance of these proposals, noting that the Finance Bill must be used not just to raise revenue, but to guide long-term economic growth.
“If we don’t support value addition through tax reforms, farming will remain unprofitable,” said Kimani.
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