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KAGARI & AZANIA: MPs must reject regressive tax proposals

Thursday June 04 2020
farm

For the long-term health of our economy, our laws and policies must protect agriculture and farmers, and so should the 2020 Finance Bill. FILE PHOTO | NMG

By MICHELLE KAGARI
By AMY AZANIA

More than two-thirds of the population live in rural areas, with 80 per cent of them engaged in food production systems. It’s these attributes that make agriculture the backbone of our economy and are the reason its mention is synonymous with development. Besides its economic value, food and its production is important to everyone.

As the Covid-19 pandemic evolves, making it difficult to determine its eventual impact with certainty, allowing avoidable disruptions to the livelihoods of our rural folk would place us at fate’s mercy. We would not only be creating extreme vulnerability but also jeopardising our ability to respond to the pandemic or manage its effects.

For the long-term health of our economy, our laws and policies must protect agriculture and farmers, and so should the 2020 Finance Bill, which is due for debate this month. We must do everything in our power to protect the capacity of farmers to produce food by providing a financial safety net that protects them from the unique challenges of farming during a pandemic.

The rural economy faces a triple threat. First, severe flooding across western Kenya has displaced entire families and communities and resulted in massive crop losses. Secondly, the desert locust invasion could prevail at least well into next month, which the Food and Agriculture Organization of the UN predicts could result in substantial crop losses.

Lastly, Covid-19 has disrupted supply chains, severely limiting farmers’ access to high-quality farm inputs, which directly threatens their work. What is more, rural markets are closed to stave off coronavirus infections and various off-farm businesses have become less profitable.

We are in dire straits.

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The government has taken steps to support the rural economy, including declaring the agriculture sector as an essential business during the pandemic, which allows farmers to access farming inputs to take advantage of the long rains.

However, the Finance Bill for the 2020/2021 financial year, which was tabled in the National Assembly on May 6 for debate and approval, rolls back those gains

First, the bill seeks to impose value-added tax (VAT) on certain key utilities, which will subsequently increase the cost of farming, at a time when it is critical to ensure increased food production.

Agriculture is the largest sector in the economy and an important contributor to gross domestic product.

At a time when the coronavirus has put food systems under immense strain, the decision to impose VAT on tractor imports is detrimental to continued food production.

Now more than ever, the government should be stepping up interventions to increase investment in farming, including by making it more affordable. Increasing the cost of tractors would make agricultural mechanisation much more difficult, undermining realisation of the key pillar of food security in the President’s ‘Big Four agenda’.

Secondly, the bill proposes to introduce a 14 per cent VAT on solar products

About 600 million people in sub-Saharan Africa live without electricity. The known limitations — most notably cost and capacity — of on-grid sources make stand-alone systems like solar a reliable option.

These clean energy alternatives support the government’s plan to achieve universal access to electricity as outlined in the Kenya National Electrification Strategy.

Taxation on solar products will significantly increase their cost. This will only serve to deepen the exclusion of rural populations from the grid, defeating the purpose for which the tax was removed in the first place. It also undermines the push for clean energy.

Rural families are already struggling to access quality farm inputs — and this is just one facet of what they are grappling with. At a time when they are doing all they can to make ends meet, the move would add to their burden by cutting them off from the grid as well.

Thirdly, the bill further proposes to charge VAT on clean cookstoves, therefore placing them out of reach for the families that most need them. Parliament must reject this bid, both because it’s impractical and as an environmental and socioeconomic statement.

Cookstoves offer three significant benefits: improved health and time savings for households; preservation of forests and associated ecosystems; and low emissions, which contribute to global climate conservation. They are a sustainable and renewable energy alternative.

To protect the long-term health of the Kenyan economy, we must implement interventions that address more of our rural and informal segments.

Lawmakers must show their commitment to their constituents by rejecting these insensitive proposals contained in the bill.

Ms Kagari is the global director for government relations and policy at One Acre Fund. Ms Azania is a government relations and policy adviser, One Acre Fund; @oneacrefund

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