In a move devised to protect the local dairy industry, new tax rates have been imposed on all the milk imported from the neighboring East African countries, which will increase its price.
While speaking in Mombasa on Tuesday, President Uhuru Kenyatta publicized the introduction of the 16-percent Value Added Tax (VAT) on milk products sourced from the East African Community (EAC) countries.
The president also ordered the powdered milk which doesn’t conform to the standards of the country to be confiscated.
“Our farmers have continued to get high milk yields, however, due to the excess supply, they are receiving meager prices,” said Uhuru.
“The situation has been exacerbated by the incursion of powdered milk which is smuggled into Kenya from outside our East Africa region. This has caused financial hardships to dairy farmers,” he added.
Uganda has reportedly been one of the leading milk importers to Kenya over the recent past.
The new VAT is expected to settle the disquiet in Kampala because both countries are members of the East African Community customs union, thus need to make the most of the harmonized tariffs on goods traded between the borders.
The Kenya National Bureau of Statistics recorded that the average cost of ½ a litre of milk has increased by over 20 percent between the years 2014 and 2018. Currently, it retails at about Ksh. 60.
On the contrary, farmers continue earning Ksh. 35 per litre of raw milk, which is only Ksh. 7 more than the past decade.
Additionally, this industry is controlled by a few milk products processors who absorb more than 90 percent of all the milk that is available for sale.
Among the processors are, New Kenya Cooperative Creameries, Brookside, Kinangop, and Githunguri.
The move to increase the tax on imported milk comes after more than 3000 bags of Uganda’s Lato milk were seized by the police in Eastleigh, Nairobi.