Policy Brief No. 12 of 2006 on Reducing Implicit Taxation of the Agricultural Sector in Kenya

Abstract

Agriculture is the dominant sector in terms of its contribution to Gross Domestic Product in Kenya (27% of GDP), employment (66% of labourforce), and exports (70% of export earnings, excluding refined petroleum exports). Transforming the Kenyan economy requires that resources flow from the agriculture sector to other sectors of the economy, although opinions differ on how this can be achieved. There are those who hold the view that the sector should be taxed heavily, while others believe that the sector should be taxed just like any other sector. In Kenya, where agriculture also provides the sole means of livelihood for the bulk of the population (51.6% of Kenya's population and 65.5% of the poor depend on subsistence farming), explicit taxation of the sector to facilitate the transfer of resources is problematic.