Kenya, the world's largest exporter of black tea, will resume its weekly tea auction this week after resolving a tax dispute, a senior government official and traders said on Tuesday. Two sessions of the country's weekly tea auction scheduled for Monday and Tuesday this week were called off over the tax row, and currency traders said the disruptions could slightly weaken the country's local currency if not resolved fast.
Kenya conducts two auctions every week with the secondary and top grade teas sold on Mondays and Tuesdays respectively. The auction sessions will be held in reverse order on Wednesday and Thursday respectively, the East Africa Tea Trade Association (EATTA), which runs the auction at the port city of Mombasa, said.
"We look up to resuming trading tomorrow (Wednesday) starting with the primary (top) grades," Peter Kimanga, chairman of the EATTA told Reuters. Tea is a major foreign exchange earner for the east Africa's biggest economy, which produced less tea in 2011 from 2010 due to adverse weather but earnings soared to 109 billion shillings ($1.32 billion) due to high prices.
A new levy, capped at one percent on the total custom value of the tea exported, was introduced in January by the ministry of agriculture, a move traders said would make Kenyan tea exports more costly and unaffordable. The government and tea traders agreed to have the tax apply only on the price at the fall of the hammer during the auction and not on the total value of the final product, which would include packaging and other add-on's, being exported.
"We have ironed out issues with the traders and trading resumes," Romano Kiome, permanent secretary at the ministry of agriculture told Reuters. "We have agreed that the levy will be charged on the cost of tea at the auction and exclude other extra costs such as packaging and other forms of value addition."
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