KRA Vs VD Berg Who will brink First
The taxman has accused a Naivasha-based company of restricting the sale of its flowers to its parent firm in the Netherlands to avoid paying taxes to the Kenyan Government.
The Kenya Revenue Authority (KRA) has claimed in court that Van den Berg Kenya Ltd (VDB-K) has been selling most of its flowers to its Dutch parent firm at extremely low prices to cut the amount of tax it can pay.
VDB-K has sued the taxman to stop a Sh1.1 billion demand it says the authority has grossly exaggerated. But the KRA says in-depth audits into VDB-K revealed that the company has been colluding with its parent firm to dodge taxes.
The KRA also claims that VDB-K failed to provide crucial information such as details of sales between it and its Dutch parent. The taxman adds that some of the documents provided were written in Dutch, making it hard to use a tax calculation method agreeable to both parties.
“In particular, VDB-K failed to give transaction details with customer names, flower varieties, sizes and prices which information was necessary to establish the end-customer buying price on transaction by transaction basis,” the KRA says.
Court order barring the KRA “VDB-K provided certain documents in Dutch language, described by its tax agents as casual agents invoices. A review of these documents revealed that the persons listed therein were the same individuals listed in the shared cost analysis,” says Mr Patrick Chege, a manager in the Domestic Taxes Department.
The Dutch-owned company has secured a court order barring the KRA from claiming the amount until Justice George Odunga has determined the suit.
Key Lessons for Kenyan Flower Industry From EPA, Brexit on Market Diversification
Flower exporters are also in this second half of the year coming to terms with Britain’s exit from EU and what it means for the flower industry. Immediately the exit news were announced the British pound plunged to its lowest levels in three decades. The Euro also took some shock.
Though not quantified, flower farms in the country, which mostly use the euro, expect higher costs due to fluctuation of the European Union’s common currency and the pound. UK is one of the key export destinations for the Kenyan flowers. The exit now would mean that Kenya would need to renegotiate its deal with UK in order to have access to the new markets. The comforting bit about this though is that the two countries still enjoy good diplomatic ties.
While the above two developments this year are enormous and will definitely have far reaching implications for the industry, they are also offering us very key lessons on diversification. Time is therefore ripe for Kenya to seriously think about diversifying its markets. It is already good news to learn that we are already exporting our flowers to 60 destinations around the world.
It was even music to the ears during this year’s International Flower Expo, IFTEX, to see buyers from virgin markets from as far as North America flying all the way to meet growers first hand in Nairobi. It is a statement of confidence on what the Brand Kenya flower has prided itself in; quality.
Such markets mean that in case of shocks the industry has a fall back plan and we don’t have to run amok trying to save an industry from political machinations. We have come from far, we can’t slam the brakes now, not when today and the future looks so rosy.
High Tech Vegetable Propagation Nursery for Naivasha
Plantech is Kenya’s newest vegetable plant propagator. The Naivasha based greenhouse company was founded as a spin-off venture from Panda Flowers, a 40 hectare rose grower at the Naivasha Flower Business Park.
Plantech has built a 2.7 hectare greenhouse with germination and nursery sections for the propagation of vegetable plants like pepper, tomato and cucumbers. This in order to serve the growing demand for quality and uniform young plants for Kenya’s growing open field and greenhouse vegetable industry. The Trinog built greenhouses at Plantech have a 9.6 m bay, 5 m section and are 4.5 m high under the gutter. The top of the greenhouse is 7.2 m. The structure includes roof ventilation and inner shading systems. Trinog has also installed movable irrigation booms and their new seeding bench system, which offers a relatively simple and affordable alternative to advanced and more heavy bench systems. It is based on a Y-type rail system that provides support for EPS propagation trays.
According to Snow Woo, the bench system is designed with the possibility to automate the seeding process with a drum seeder machine. It is possible to install the bench system for any size of tray and the flexibility of the system allows upscaling in the future. “This rail bench system is easy to use and it’s a fairly low investment”, said Trinog’s Snow Woo.
Ethiopian Growers Suffering From Severe Rainy Season
The rains are heavier than last year. Usually, on a monthly basis and in our region, we have to deal with 180 millimeters of rainfall in the rainy season. However, this year 248 millimeters of rain fell. I even heard that about four other flower farms have been flooded.”
Decrease in production
Due to the heavy rains and cloudy days, the level of humidity is higher, which increases the occurrence of diseases like botrytis, downy mildew and powdery mildew. As a result, the production at the majority of the farms in Ethiopia decreased. “Usually, during this time of the year, our production decreases by 20 - 30 percent, because of the rains and low season. However this year, the heavy rains made the production drop even further, by about 50 percent”, says Bereket Adane of Dugda Flora.
Higher prices
Fortunately, the prices are higher. “As there are less flowers on the auction, the prices increase. The prices are about 50 percent higher than they should be during this time of the year. These prices are almost as high as during Valentine’s Day.” In spite of these higher prices, Adane prefers last year’s situation over this year’s. “The production costs are the same as usual, but we have less products. And this price increase will not do enough of a job.”
Rose Acreage In Europe Gradually Decreasing
Every year, the number of roses imported into Europe grows, especially from Africa. Around 65% of the imported roses currently comes from Kenya and Ethiopia. In collaboration with rose breeders, Royal FloraHolland is documenting the worldwide production of roses. This survey provides insights into the acreage devoted to growing roses in each country, the developments and marketing channels.
Rose acreage decreasing
Each year the acreage devoted to growing roses decreases further. In the past 5 years the decrease was 27%. In Europe there are currently around 1,700 ha for growing roses. In Germany, the Netherlands, Spain and Italy, there is still an average of 200 ha for growing roses in each country. High energy costs, legislation and the low prices for imported roses are greatly influencing the production. In 2004 the Netherlands still had about 850 ha for rose production; this has declined to 238 ha in 2016. Rose growers are stopping or switching to another crop. The largest decrease was seen in Italy, where the production was much higher 10 years ago. Due to the low prices of imported roses, this decreased precipitously. But given its good quality, many varieties and innovation, rose cultivation will never disappear entirely from Europe
