The Kenya Flower Council (KFC) wants the government to review its decision to end Covid-19 tax relief measures starting January.
The flower farmers lobby group wants the measures extended to the end of next year expressing concern that the gains made in reviving the sector could be eroded and lead to massive losses.
Last week, National Treasury Cabinet secretary Ukur Yatani announced that the tax relief measures would come to an end with VAT back to 16 percent from 14 while corporate tax would be at 30 from 25 percent.
According to the Council CEO Clement Tulezi, a higher VAT rate would have a direct impact on the sector which is still on its knees.
“There were no consultations among top players and in two weeks we will go back to the old tax regime and this will definitely have a negative effect,” he said on Tuesday.
Tulezi called on the government to reconsider the decision and suspend the directive for the whole of 2021 noting that it would have far-reaching effects on export of flowers to the EU.
“We had projected that the sector would fully recover by June 2021 but the move to suspend the Covid-19 tax relief measures and end the stimulus package will hit us negatively,” he said.
Tulezi was optimistic that the sector could recover but was quick to note that the second wave of the pandemic had caused concerns and major losses to the farmers.
He said that the lockdown in France, Germany and Netherland among other countries had affected exports with consumers locked indoors.
“We are happy that the lockdown has been eased and we expect exports to increase in the coming days despite the tax challenge we are facing,” he said.
Tulezi termed Christmas and Valentine as a very critical period for the sector as demand for flowers shoots up mainly in the EU market.
“Our hopes on recovery were pegged on the festive season and Valentine but this will change as the old VAT and corporate taxes come to effect on the 1st of January,” he said.
Defending the government's decision, Yatani said that revenue collection had dropped drastically due to the pandemic adding that the county had foregone tax revenue running to Sh65 billion.
“In respect to the foregoing, and given the easing of some of the containment measures and subsequent resumption of normalcy, it has, therefore, become necessary to return to the pre-COVID-19 tax rates effective 1st January 2020," he said in a statement.
In April 2020, President Uhuru Kenyatta ordered the lowering of corporate, individual income (PAYE) and Value Added Tax (VAT) rates as part of a temporary measure to cushion Kenyans from the adverse effects of the Covid-19 pandemic.