The Ministry of Agriculture and Livestock Development has formally called for a review of tax policies in the Finance Bill 2025, aiming to ease the financial burden on farmers and boost the agricultural sector’s contribution to Kenya’s economy. The Ministry highlights agriculture’s critical role, accounting for 21% of the country’s GDP and employing over 40% of the population. This sector is a cornerstone of Kenya’s economic growth and rural livelihoods, making the need for supportive policies vital.
At the heart of the Ministry’s argument is the high cost of agricultural production, which continues to hold back farmers, especially small-scale producers who form the backbone of Kenya’s farming community. Many farmers struggle with limited capital, making it difficult to afford key inputs such as fertilisers and improved seeds. These inputs are essential for modern, productive farming but are currently priced higher than what many farmers can reasonably pay given the prices they receive for their crops.
The Principal Secretary for the State Department for Agriculture emphasized that the gap between the costs of production inputs and the income farmers earn from their produce discourages investment in improved farming methods. This situation impedes productivity growth and prevents many farmers from fully adopting modern agricultural technologies that could significantly increase yields and improve food security.
To address this challenge, the Ministry proposes revisiting the taxes applied to agricultural inputs, with the goal of making fertilisers, seeds, and other essential resources more affordable. Reducing the tax burden on these inputs would lower overall production costs, encouraging more farmers to adopt improved technologies and practices.
Lower input costs could be a game changer for small-scale farmers, who are often the most vulnerable to price fluctuations and financial constraints. With more affordable access to quality seeds and fertilisers, these farmers could increase their output, contribute to greater food availability, and improve household incomes. This in turn would create more jobs and stimulate economic activity in rural areas, contributing to poverty reduction and enhanced livelihoods.
The Ministry’s push for tax reforms also aligns with broader goals of promoting sustainable agriculture. By incentivizing farmers to adopt better inputs and modern techniques, the sector could see improvements in productivity without necessarily expanding cultivated land, thereby supporting environmental conservation and sustainable land use.
The proposed tax reforms come at a time when the Finance Bill 2025 is under parliamentary consideration, with the agricultural sector receiving significant attention. Stakeholders in the farming community have welcomed the Ministry’s proposals, hopeful that a revised tax structure will create a fairer and more enabling environment for agricultural growth.
If adopted, these changes could significantly reshape Kenyan agriculture. Making production inputs more affordable would not only help farmers increase output but also improve the competitiveness of Kenyan agriculture in both local and international markets. This would support the country’s economic resilience, especially as global food demand continues to rise.
The ongoing discussions within the Departmental Committee on Finance and National Planning focus on balancing the need to sustain government revenue with the necessity of supporting farmers. The decisions taken will be crucial in setting the direction for Kenya’s agricultural policy and ensuring that farming remains a viable and profitable sector.
Ultimately, the Ministry’s efforts underscore the recognition that agriculture is more than just an economic activity it is a foundation for national development, food security, and rural prosperity. By reforming tax policies to ease production costs, Kenya can strengthen its agricultural sector, improve the livelihoods of millions of farmers, and secure a more sustainable future for the country.
