Kenya’s small tea farmers are taxpayers, and the majority are unhappy about the Kenya Tea Bonus. The payments come from KTDA. They are entitled to deduct all expenses incurred when their net pay after tax is established. Unfortunately, the labour costs of many small tea farmers are often overlooked.
That morning cup of tea is a ritual, and it comes with a bonus from Kenya tea. It is a source of national pride. But for the small-scale farmer who grew those leaves, the story is often bitter.
While large tea estates thrive, small-scale tea farmers struggle. Why? The system is stacked against them.
There is a simple, powerful solution. We must pay small farmers more by formally recognizing their labor costs, just as large estates do.
The Great Tea Bonus Divide
Every year, farmers wait for the “tea bonus.” This is their share of the profit from the sale of tea. It is a crucial payment. It pays school fees, builds homes, and sustains families.
But the calculation is unfair. Large, privately owned tea estates operate in a distinct manner. They can deduct their operating expenses to establish the taxable profit. They share the profits later.
One of the key deductible expenses is labor.
The tea estates pay workers’ wages. That wage is a business expense. It is deducted from their total revenue, as well as other costs. The profit is then calculated. This protects the estate’s financial stability.
The small-scale farmer gets no such consideration. Their labor is invisible in the bonus calculation.
Recognising the Farmer’s Sweat
Think about a smallholder’s work. They are the manager and the laborer. Their task is endless.
a. They pluck the tea leaves.
b. They weed and fertilize the farm.
c. They prune the bushes.
d. They transport the leaves to the collection center.
This is not free.
It is a massive investment of time, energy, and money. It is their primary business expense.
What if we assigned a value to this labor? Let us use a conservative estimate of 40%.
This 40% would represent the cost of the farmer’s own work. It would account for the hours spent tending the farm. It would cover the cost of hiring casual labor when needed.
This is a standard business practice. It is how every successful company in the world operates. Every tea farmer should account for their costs to find their actual profits.
For small farmers, this crucial step is missing. Their gross sales are treated as their profit. This is a fundamental flaw.
How the 40% Labor Model Would Work
The change is straightforward.
Currently, a farmer’s bonus is based on the total price of tea sold. Their personal labor cost is ignored.
Under a fair system, the farmer’s labor cost would be recognised as a deductible expense.
Let us imagine a farmer generates kshs 100,000 in tea sales for the year.
Current System
The bonus is calculated on the full kshs 100,000.
Fair System
A 40% labor cost (kshs 40,000) is deducted. The bonus is then calculated on the remaining kshs 60,000.
Wait.
Does this mean they get less? Absolutely not.
Here is the magic.
The tea bonus is a share of the profit. By deducting labor costs, we accurately define the real taxable profit. The key is that the share of that profit paid to the farmer must be increased significantly.
The goal is to ensure the farmer’s final take-home pay is much higher. It accurately reflects their accurate input and investment.
This will be a loss to the income tax but a gain to VAT, excise duty, etc., taxes.
Why This Change Is Non-Negotiable
This is more than just math. It is about justice and sustainability.
a. It is Economically Just
Farmers are business owners. Their labor and that of their families is their most significant input. Failing to account for it is an injustice.
It hides the actual cost of production. The farmers end up paying more taxes, and their take-home pay, including the tea bonus, is less.
b. It Fights Poverty
A higher, fairer income would transform rural economies. It would keep children in school by providing school fees and all other necessary expenses.
It would also improve living standards, especially in the rural areas. The tea farmers would be empowered.
c. It Secures Kenya’s Tea Future
When farmers are paid fairly, they invest more in their farms and families. They will use more fertilizer on their tea farms. They pluck tea and tend their farms with greater care. This will improve the quality and quantity of Kenyan tea.
If farmers continue to be squeezed and paid low tea bonuses, many will probably abandon tea cultivation. They will uproot their tea bushes to make way for more profitable crops. This poses a significant threat to the entire industry and the country’s economy.
The current system treats small farmers as cost-free producers. This is a fantasy. Their sweat has a price. It is time for the tea industry to pay it. The estate tea farmers do not differ from small tea farmers.
Let us brew a fairer future for the hands that feed our national pride.
Ready to brew a change?
Share this article to spread the word. If you are part of the tea industry, we challenge you to advocate for a transparent cost model. With every share, we grow closer to justice for the farmers behind every cup. A taxpayer is a taxpayer irrespective of the size of their business. Need tax and Investment services? Click HERE.
Other articles to read:
a. Tax and off-plan housing investments – HERE
b. Refund of VAT on bad debts – HERE
