Tea levy debate deepens as TBK defends new tax amid farmers’ concerns
Willy Mutai
By WMW
The Tea Board of Kenya (TBK) has mounted its strongest defence yet of the controversial Tea Levy introduced last month, dismissing claims that the new charge has triggered a crisis at the Mombasa Tea Auction and insisting that the levy is critical to the future competitiveness of Kenya’s most valuable agricultural export.
In a statement, TBK sought to counter what it termed as “misinformation” surrounding the Tea (Levy) Regulations, 2026, which took effect on May 1.
The Board’s intervention comes against a backdrop of growing disquiet among tea stakeholders, particularly leaders allied to the Kenya Tea Development Agency (KTDA), who have linked declining tea absorption rates at the auction to the new levy.
At the centre of the dispute is a 0.8 per cent levy imposed on the auction value of tea exports and customs value of direct sales.
The levy, introduced under Section 53 of the Tea Act and operationalised through Legal Notice No. 56 published in April, is expected to generate funds for tea sector development.
However, the Board insists that much of the criticism directed at the levy is based on misconceptions rather than facts.
Unsold tea stocks
One of the most contentious claims has been that the levy has led to a buildup of unsold tea stocks at the Mombasa auction.
TBK rejected the assertion, arguing that current market conditions are largely seasonal.
According to the Board, through the CEO Willy Mutai, the introduction of the levy coincided with peak tea production driven by favourable rainfall in tea-growing regions. At the same time, international demand slowed due to summer conditions in key markets and disruptions in shipping routes caused by the ongoing conflict in the Middle East.
“The average weekly uptake for Kenya tea at the auction ranges between seven and eight million kilogrammes, while supplies during peak production periods reach between nine and 11 million kilogrammes,” the Board said.
Data provided by TBK showed that approximately 77 per cent of tea offered at the auction during May and early June was sold, compared to 70 per cent during the same period last year.
The Board also took a swipe at KTDA, accusing the agency of distorting the market by withdrawing teas even when buyers had matched factory reserve prices.
“Such practices are detrimental to tea growers because the same teas often attract lower prices when reintroduced to the market weeks later,” TBK said.
The allegation is likely to intensify tensions between the regulator and KTDA, which manages tea factories on behalf of more than 680,000 smallholder farmers.
KTDA officials have maintained that the levy has made Kenyan tea less attractive to buyers, with some opting for teas from neighbouring countries.
Earlier this month, some factory directors claimed certain factories recorded historically low sales at the auction, blaming buyers’ reluctance to absorb the additional costs associated with the levy.
Price fluctuations ‘normal’
TBK also dismissed suggestions that the levy had caused a decline in tea prices.
It argued that fluctuations in auction prices have always reflected global supply and demand dynamics rather than domestic policy changes.
Over the past five years, the Board said, tea prices during peak production seasons have ranged between USD 1.99 and USD 2.46 per kilogramme of made tea.
During the April-May 2026 high production period, Kenyan tea fetched an average of USD 2.24 per kilogramme. That figure was higher than the USD 1.99 recorded during the same period in 2025 and similar to the prices achieved in 2024.
The Board attributed recent market weakness to geopolitical tensions, economic slowdowns and changing consumption patterns in key export destinations.
Who pays?
Perhaps the most politically sensitive issue has been whether tea farmers themselves will shoulder the burden of the levy.
TBK insists they will not.
The Board says the levy is payable by exporters and importers at the point of export or import and is therefore a consumer tax rather than a deduction from farmers’ earnings.
Based on Kenya’s average tea price of USD 2.27 per kilogramme in 2025, the levy translates to roughly USD 0.018 per kilogramme, equivalent to about KSh2.36.
The regulations also impose a 100 per cent import duty on imported made tea, a measure the Board says is designed to shield the local industry from an influx of cheap, low-quality imports.
Revenue generated from the levy will be distributed across key industry interventions.
Half of the proceeds will go towards tea price stabilisation for farmers. Fifteen per cent has been earmarked for maintenance of feeder roads in tea-growing areas, 20 per cent for tea research and development, and another 15 per cent for the marketing and promotion of Kenyan tea.
A divisive reform
The Tea Levy Regulations have reopened old debates about who benefits from Kenya’s tea industry and who should bear the costs of sustaining it.
Government officials argue that the levy restores a funding mechanism that existed before being abolished in 2016 and is necessary to strengthen the industry’s resilience.
Agriculture Cabinet Secretary Mutahi Kagwe has previously defended the levy, saying Kenya has for years failed to adequately market and protect its tea brand in global markets.
“Kenyan tea is globally recognised, yet many markets do not identify it as Kenyan. Sustainable funding is necessary if we are to build and protect that identity,” he said.
Tea Board Chairman Ndung’u Gathinji has similarly argued that the levy should be viewed as a strategic investment rather than a punitive tax.
Critics, however, question both the timing and implementation of the measure.
Farmer representatives have complained that they were not sufficiently consulted and warn that the cumulative burden of taxes, statutory deductions and operational costs continues to erode growers’ earnings.
Some have threatened legal action, arguing that any policy affecting farmers’ livelihoods must enjoy broader stakeholder consensus.
Global comparisons
TBK insists Kenya remains among the most competitive tea producers globally despite the levy.
The Board notes that Kenyan tea sells at an average of USD 2.27 per kilogramme, significantly below teas from Sri Lanka, India, China and Rwanda, whose prices range between USD 3.50 and USD 4.50 per kilogramme.
It also points out that other tea-producing countries impose similar charges.
Sri Lanka levies various tea development charges amounting to between KSh2.82 and KSh5.24 per kilogramme. India subjects tea to a five per cent Goods and Services Tax, while Bangladesh imposes a one per cent cess on auction prices.
Pakistan, a major tea-importing nation, applies multiple taxes and charges that cumulatively approach 30 per cent.
Against that backdrop, TBK maintains that Kenya’s levy of between Sh2 and Sh3 per kilogramme is modest and unlikely to undermine competitiveness.
The bigger picture
Tea remains Kenya’s leading agricultural export and one of its most important sources of foreign exchange.
The sector supports millions of livelihoods directly and indirectly, with smallholder farmers accounting for more than 60 per cent of national production.
Yet the industry faces persistent challenges, including climate variability, rising production costs, overreliance on traditional markets and limited value addition.
Whether the Tea Levy becomes the catalyst for sector transformation envisioned by policymakers or another flashpoint in the long-running battle over control and distribution of tea revenues remains to be seen.
For now, the debate reflects a larger question confronting Kenya’s tea industry: how to finance its future without alienating the very farmers whose labour sustains it.
As stakeholders continue to trade accusations and defend competing narratives, one thing is certain; the battle over the tea levy is far from over.
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