The Finance Bill 2024 has introduced several changes set to impact various sectors, including agriculture and horticulture. One of the most significant highlights of the Finance Bill 2024 is the introduction of new tax incentives aimed at promoting sustainable farming practices. Farmers who adopt eco-friendly methods, such as organic farming, water conservation techniques, and renewable energy usage, will benefit from tax deductions of up to 20%. This initiative is expected to encourage more farmers to invest in sustainable practices, ultimately benefiting the environment and ensuring long-term agricultural productivity.
In an effort to boost mechanization in agriculture, the bill also reduces import duties on agricultural machinery and equipment from 25% to 10%. This reduction aims to make advanced farming tools more accessible and affordable for small and medium-scale farmers, enhancing productivity and efficiency in the sector. By lowering the cost of acquiring modern machinery, the bill hopes to spur technological advancement and increased output in agriculture.
Additionally, the Finance Bill 2024 provides increased subsidies on essential horticultural inputs such as seeds, fertilizers, and pesticides. The subsidies for these inputs have been increased by 15%, which is designed to reduce the cost of production for horticultural farmers, allowing them to maintain competitiveness in both local and international markets. This move is expected to bolster the horticulture industry, which is a vital part of Kenya’s agricultural economy.
Misses
Despite these positive steps, the bill also contains elements that have raised concerns among farmers and stakeholders. One of the most contentious aspects is the increase in Value Added Tax (VAT) on certain agricultural produce from 8% to 12%. This change is likely to lead to higher prices for consumers and reduced profit margins for farmers. The increased VAT could make it harder for farmers to sustain their operations and remain competitive, posing a significant challenge to the agricultural sector.
Critics have also pointed out that while the bill offers several incentives for larger agricultural enterprises, it falls short in providing adequate support for smallholder farmers. Small-scale farmers, who constitute a significant portion of Kenya’s agricultural sector, may find it challenging to benefit from the incentives and subsidies due to bureaucratic hurdles and lack of access to necessary resources. This oversight could exacerbate existing inequalities within the agricultural industry.
Furthermore, the bill has been criticized for not placing enough emphasis on comprehensive climate change mitigation strategies. The allocated budget for climate change mitigation in agriculture stands at KSh 1.5 billion, which many stakeholders argue is insufficient given the increasing frequency of extreme weather events affecting agricultural productivity. More robust measures and a higher budget allocation are needed to support farmers in adapting to and mitigating the impacts of climate change effectively.
Green Initiatives Dilemma
The Finance Bill also introduces a new Eco Levy on goods negatively impacting the environment, such as technology items and plastic packaging. While this aims to reduce pollution and encourage sustainable alternatives, it may lead to higher costs for consumers, disproportionately affecting lower-income individuals. The bill also restricts VAT exemptions on equipment for renewable energy projects, potentially discouraging investment in solar and wind energy. The new withholding tax on interest from green bonds, set at 5% for residents and 15% for non-residents, may make financing green projects more expensive.
Impact on Women and Youth in Agriculture
The Finance Bill 2024 introduces changes that disproportionately affect women and youth in agriculture, who often operate on limited budgets. The increase in excise duty on fuel from KSh 21.95 per liter to KSh 24.95 per liter directly impacts the cost of farming operations. Additionally, removing VAT exemptions on essential agricultural inputs like fertilizers, pesticides, and seeds subjects them to the standard VAT rate of 16%, further increasing financial burdens.
Increased freight tax from 2.5% to 3% raises the cost of imported agricultural inputs and exported produce, making it harder for small-scale women and youth agripreneurs to maintain profitability. However, the bill also includes a 10% per annum investment allowance on specific agricultural equipment and infrastructure, which can encourage investment in modern farming technologies.
