Kenya’s fresh produce exporters have called on Parliament to implement urgent fiscal reforms in the Finance Bill, 2026, highlighting that increasing taxation and operational expenses are jeopardizing the competitiveness of the nation’s horticulture sector.
Before the Departmental Committee on Finance and National Planning during Bill deliberations, the Fresh Produce Exporters Association of Kenya (FPEAK) indicated that multiple taxes, high freight expenses and delays in Value Added Tax (VAT) refunds are exerting continuous pressure on exporters.
FPEAK Chief Executive Officer Hosea Machuki informed the committee that Kenya stands to lose market share to rival horticulture producers such as Ethiopia, Egypt, Morocco and Colombia.
“Members, multiple taxes, elevated freight charges and problematic delays in VAT refunds are swiftly diminishing local competitiveness against assertive regional and international competitors like Ethiopia, Egypt, Morocco and Colombia,” stated Machuki.
He mentioned that the horticulture sub-sectorencompassing flowers, fruits and vegetablesaccounts for five percent of Kenya’s Gross Domestic Product (GDP), generates approximately KSh150 billion yearly in foreign exchange earnings and sustains nearly six million livelihoods.
To support the sector, FPEAK suggested eliminating excise duty on packaging materials, implementing a feasible Electronic Tax Invoice Management System (eTIMS) compliance threshold for small-scale farmers and introducing reforms to simplify multiple taxation through seamless VAT credits.
The association also requested exemption from excise duty for imported packaging paper, noting that neither Kenya nor the broader East African region presently manufactures the specialized kraft paper required by exporters.
“Chair, there is no domestic or regional manufacturer for kraft paper packaging material. The only available alternative is packaging derived from sugar bagasse which is inferior quality and unsuitable for export products,” Machuki explained.
During the proceedings, Finance and National Planning Committee Chairperson Kuria Kimani requested the association to specify the exact Harmonized System (HS) codes for the imported packaging materials to help lawmakers determine the appropriate tax treatment.
Committee members recalled that during discussions on the Finance Bill, 2024, some local manufacturers had claimed they could produce kraft paper domestically.
“Your Association needs to clarify the HS Code of the packaging material in question, so we can establish the tax provision for that packaging material when evaluating your proposal,” Kimani stated.
FPEAK maintained that removing excise duty on imported packaging inputs would decrease production costs for local carton manufacturers and consequently enhance the international competitiveness of Kenyan fresh produce.
The association also requested lawmakers to establish a reasonable threshold for eTIMS compliance, noting that current Kenya Revenue Authority regulations require all businesses, irrespective of turnover, to issue electronic invoices.
“Under present guidelines, the Kenya Revenue Authority compels all businesses regardless of revenue to issue eTIMS electronic invoices. We believe compelling rural, small-scale farmers to immediately adopt complex eTIMS procedures for minor transactions disrupts the supply chain,” Machuki commented.
FPEAK recommended exempting transactions up to KSh5,000 from mandatory compliance to protect smallholder farmers from excessive administrative burdens while preserving their function in export supply chains.
To tackle liquidity issues from delayed VAT refunds, the exporters proposed revising Section 47 of the Tax Procedures Act to permit automatic application of overpaid VAT against other tax obligations.
They further requested reconfiguration of the iTax system to allow accumulated VAT refunds to offset Pay As You Earn (PAYE), Withholding VAT, Withholding Tax and final tax liabilities.
“This prevents the VAT refund backlog where licensed exporters accumulate substantial credits causing significant liquidity constraints,” the association emphasized.
FPEAK also requested comprehensive cost-reduction measures, including zero-rating agricultural inputs such as pest control products and fertilizers and reducing VAT on petroleum products from eight percent to zero to decrease production and transportation expenses.
Additionally, the association suggested broadening eligibility criteria for Special Economic Zones (SEZs) to permit established export packhouses to qualify based on demonstrated manufacturing expansion capacity instead of requiring extensive greenfield land.
In concluding statements, FPEAK urged lawmakers to accept the proposals, asserting that these measures would establish a predictable, high-growth environment conducive to national economic advancement.