Tea farmers across the country could be facing acute foreign market disruptions after the Mombasa County government imposed cess charges per bag for tea destined to Mombasa Tea Auction meant for export.
The East African Tea Trade Association (EATTA), the apex body representing the tea industry in Africa with membership of at least ten African countries has protested the move saying the Mombasa Tea Auction Center operates as a special economic zone exempted from local taxes.
Through a protest correspondence to Mombasa Governor Hassan Joho through his County Executive Committee Member in charge of Trade, Energy and Industry Fauz Rashid, EATTA Managing Director Edward Mudibo said the cess levied by the county government amounts to taxing an export product.
“The purpose of this communication is therefore to write to you requesting that in line with the Kenya law and with international best practice, trucks carrying tea destined for Mombasa should not be subjected to cess as this constitutes taxing an export product. We look forward to your prompt and positive response” Mudibo said through a letter dated January 12, 2018.
EATTA runs the Mombasa tea auction center, which is the largest tea auction in the world and the commodity is exclusively destined for export.
Besides Kenya, other EATTA member countries include; Uganda, Tanzania, Rwanda, Burundi, DR Congo, Malawi, Madagascar Mozambique and Ethiopia.
“The tea coming into Mombasa is warehoused in one of the designated warehouses from where it is assigned to an auction on a particular date after which the tea is exported.” EATTA lamented.
Mombasa County is charging sh32 per package of tea at Miritini weighing 65kilograms.
Last weekend, county officials at Miritini seized over 50 lorries from tea factories across the country headed to the tea auction over the imposed levies.
The new development is likely to have negative implications in foreign exchange earnings with tea contributing the biggest share to the country.
The government has made provision in the Value Added tax (VAT) Act exempting tea traded in the auction from paying VAT.
EATTA argues that the tea is not meant for local market and therefore should not be taxed.
However, EATTA is mulling over shifting the auction center from Mombasa to Nairobi to reduce the distance and proximity to tea factories and farmers.
Similar charges were introduced by the county government in 2014 and suspended in 2015.
The county is legally bound to collect levies on goods and product meant for local market.
Among the tea growing areas in Kenya are Kericho, Bomet, Nandi, Kiambu, Thika, Maragua, Muranga, Sotik, Kisii, Nyamira, Nyambene, Meru, Nyeri, Kirinyaga, Embu, Kakamega, Nakuru and Trans-Nzoia.