Dairy farmers face cost inflation in new tax Bill

A worker at the New KCC factory in Kiganjo, Nyeri sorts milk powder cans on July 6, 2019. PHOTO | GRACE GITAU 

By GERALD ANDAE
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Summary

• Livestock farmers will pay more for animal feeds if the tax Bill to be discussed in Parliament as early as this week is passed and the President assents it into law, manufacturers have warned.
• Tax Amendment Bill 2020 that comes with far-reaching reforms, calls for the introduction of 16 percent value-added tax (VAT) on major ingredients used in making of animal feeds.
• Lobby Animal Feed Manufacturers (Akfema) says a 70-kilo bag of dairy meal, chick mash and broiler feeds will go up by between Sh300 and Sh600 depending on the type of meal.

Livestock farmers will pay more for animal feeds if the tax Bill to be discussed in Parliament as early as this week is passed and the President assents it into law, manufacturers have warned.

Tax Amendment Bill 2020 that comes with far-reaching reforms, calls for the introduction of 16 percent value-added tax (VAT) on major ingredients used in making of animal feeds.

Lobby Animal Feed Manufacturers (Akfema) says a 70-kilo bag of dairy meal, chick mash and broiler feeds will go up by between Sh300 and Sh600 depending on the type of meal.

“This is a bad move that will impact negatively on farmers.

“The introduction of VAT on key ingredients that we use in making feeds will increase the price of the meals, which will have to be absorbed by the farmers,” said Joseph Karauri, the chairman of Akfema.

The amendment Bill, which was to be discussed in Parliament if it reconvenes, wants the current tax status of maize germ wheat pollard, sunflower and cottonseed cake that are used in making of animal meals to attract a 16 per cent duty from the current zero-rated status.

Manufacturers normally get cotton and sunflower cake from Uganda and Tanzania as there are hardly enough stocks locally, which will further push up the cost of price because of transport expenses involved.

The said ingredients make 60 per cent of the production cost of the animal feeds according to Mr Karauri.

The move will impact negatively on farmers who are already grappling with high cost of production resulting from high cost of other inputs. In 2014, an outcry from farmers saw the government zero-rate duty on animal feeds after the introduction of the 14 per cent duty led to higher prices of livestock meals. The Bill is likely to draw mixed reactions from MPs as law makers from regions where livestock are kept in large scale are likely to oppose the amendments. Legislators, especially from the North Rift have been urging the government to subsidise inputs to enable farmers to break even in their farming enterprise. Kenya's milk cannot compete favourably in the regional market because of high cost of production locally, hence making it expensive when compared with those from other countries.