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.

This policy brief is based on KIPPRA Discussion Paper No. 52 on Implicit Taxation of the Agricultural Sector in Kenya. The study sheds some light on how the agriculture sector in Kenya is taxed, either directly or indirectly, and proposes how this can be done more efficiently to ensure that the sector plays its role in economic development, employment creation and poverty reduction.