Relief as Govt Lifts Packaging Tax on Agricultural Exports

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Relief as Govt Lifts Packaging Tax on Agricultural Exports

Agriculture CS Mutahi Kagwe has announced far-reaching reforms for the agriculture sector, with the government scrapping taxes on packaging materials for farm exports.

Speaking at the North America Tea Conference in South Carolina on Saturday, September 6, Kagwe said the removal of the levy is part of a broader plan to make Kenya an attractive destination for investors, particularly in the tea industry.

According to the CS, packaging agricultural produce within Kenya will reduce costs for exporters and deliver fresher, better quality products to international markets. “Packaging at origin eliminates unnecessary costs, improves competitiveness and strengthens Kenya’s position in the global tea market,” Kagwe said.

Reversing a Controversial Tax

The Finance Bill 2025 had introduced a 25% excise duty on key packaging materials like kraftliner and kraft paper. This led to a sharp increase in production costs across several value chains, from avocados to cut flowers. Exporters had warned that the additional costs would make Kenyan goods less competitive abroad.

For instance, the cost of producing a 10kg box of avocados went up by Ksh26 to Ksh182, while a flower box rose by Ksh50 to Ksh247. The Kenya Association of Manufacturers (KAM) had cautioned that the taxes would reduce Kenya’s share in the global agricultural market.

Packaging accounts for 30-40% of retail prices for fresh produce exports. With corrugated cartons and kraft paper at the core of the supply chain, the removal of the tax will be a big relief for farmers and exporters.

Tea Industry at the Core

Kenya is the world’s largest exporter of black tea, with most of the commodity being shipped through auctions like the Mombasa Tea Auction. Tea has traditionally been exported in bulk units of 50kg sacks or fibreboard boxes.

But Kagwe said packaging locally to international shelf standards will create more value for producers while meeting consumer demands abroad. “Direct-to-shelf packaging means freshness, traceability and better income for farmers,” he added.Tea is a mainstay of the economy. In 2024, the sector earned Ksh181 billion in exports, with major markets being Pakistan (206.27 million kg worth Ksh70 billion), Egypt (86.90 million kg worth Ksh23.96 billion) and the UK (57.44 million kg worth Ksh17 billion). Overall production was 598.47 million kg in the same year, up 4.95% from 2023.

So the removal of packaging taxes is a strategic move to consolidate Kenya’s position as a global tea powerhouse and open up new opportunities for other agricultural exports.

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Relief as Govt Lifts Packaging Tax on Agricultural Exports