Linturi reveals how tax reliefs cost State Sh16b

Tuesday, November 21st, 2023 05:50 | By
Agriculture Cabinet secretary Mithika Linturi PHOTO/Print
Agriculture Cabinet secretary Mithika Linturi PHOTO/Print

The government missed out on revenues amounting to Sh16.5 billion between January and September this year following its decision to allow the duty-free importation of sugar, maize and rice, MPs heard yesterday.

Agriculture Cabinet Secretary Mithika Linturi told the legislators that of the money Sh3.3 billion was in respect to maize importation, Sh13.2 billion was for rice but failed to disclose the amounts lost in the importation of sugar.

He said: “Honourable Members, it is worth noting that there was no revenue lost but it was foregone to safeguard Kenyans. The foregone revenue is the percentage of duty normally charged on commodities delivered at 50 per cent on maize and 35 per cent or $200 per tonne whichever is more on rice.”

Appearing before the Departmental Committee on Agriculture chaired by Tigania East MP John Mutunga, Linturi told MPs that a total of 163,827 tonnes of sugar from Non-Comesa countries landed in Kenya between January and September.

He also revealed that a total of 156,957 tonnes of maize valued at Sh6.6 billion was imported between January and September while 707,107 tonnes of rice worth Sh37.6 billion was shipped into the country during the same period.

The move follows the government’s decision to allow traders a six-month duty-free importation window to bring into the country 1.1 million metric tons of maize and 1.1 million metric tons of rice.

Linturi noted that following the prolonged drought between 2020 and 2022 that was described as the worst in 40 years, maize production was lowest in 10 years at 34.4 million for a 90 kg bags against a national consumption requirement of 50 million 90 kg bags, rice production was below the 100,000 tonnes against an annual demand of 950,000 tonnes.

Kenya, he said produced about 34.4 million-90-kilogram bags of maize in 2022 against 50 million bags annual consumption requirement resulting in a deficit of 15.6 million bags (1.4 million MT).

He, however, said that the government did not allocate a budget for distribution as this was left to traders and millers.

Linturi said: “Therefore, the revenue foregone resulting from maize importation was 3.296 billion while rice was Sh13.166 billion totaling Sh16.462 billion. The exchange rate of $1 at Sh140 in August 2023.” And added: “The food situation and early warning reports prompted the ministry to recommend importation of various food commodities to bridge the food deficit and stabilise high prices of food commodities.” In his presentation before the committee, Linturi told the MPs that the duty-free importation of the three commodities stabilised food products in the country.

On maize, Linturi said that in January this year, the retail prices for Maize flour was Sh250 per 2ikgs but the importation has reduced it to Sh159.

The prices for rice were Sh2,500 per 25 KG in January this year but the importation has reduced the prices to Sh1,800 per 2kg bag by July this year.
Cost reduction
He, however, said that the duty waivers on rice could not result in drastic and sustained cost reduction of the commodities due to various reasons including high cost of maize and rice in international markets that were coupled with export restrictions from major supplies including Mexico and Tanzania for maize and India for Rice.
He also cited the strengthening of the US dollar against the Kenyan shilling which increased the commodity prices hence increasing land process as well as the sudden increase of the commodity from Sh1,800 to the current Sh2,650 per 25kg bag between August and September due to the removal of duty waiver. On sugar imports, Linturi told the MPs Kenya has an annual sugar deficit of about 600,000 tonnes and relies on the Comesa region.

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