The costs for packaging flowers, avocados, and other fresh produce have risen by up to 25% in the past month due to a newly introduced tax on packaging materials. This has sparked concerns among exporters regarding the potential loss of access to international markets.
The excise duty on kraftliner and kraft paper, which took effect on July 1, 2025, has raised the production cost of a 10kg avocado box by Sh26 to Sh182 and a flower box by Sh50 to Sh247.
Manufacturers and exporters of fresh produce are now warning of possible market losses as Kenyan exports become less competitive due to these rising costs.
The government imposed a 25% excise duty on kraftliner and kraft paper through the Finance Act 2025. These materials are crucial for creating packaging products like carton boxes, packets, and wrapping papers used for shipping avocados and flowers.
Stakeholders in the manufacturing and fresh produce export sectors are now cautioning that this new tax adds to existing taxes, leading to higher product prices, threatening overseas markets for exporters, and putting companies at risk of layoffs.
Increasing packaging costs are directly driving up the prices of Kenyan goods, including vital exports like coffee, tea, avocados, and other horticultural products. This trend poses a serious risk to the country’s share in the global market and its export competitiveness,” stated the Kenya Association of Manufacturers (KAM).
The association warns that the new tax jeopardizes the competitiveness of Kenya’s flower, avocado, and tea exports, where packaging accounts for 30 to 40 percent of retail prices. Agricultural exports heavily depend on paper packaging, with corrugated cartons and kraft paper being essential components.
Kenya does not have the raw materials needed to produce kraftliner and kraft paper, relying instead on imports for these packaging materials. However, the excise duty has made importing them more expensive.
Manufacturers estimate that only about one-third of the 87,900 tonnes of installed capacity for bags and balers is being utilized, while just over half (55 percent) of the 148,753 tonnes of installed capacity for carton/box production is in use.
“Over the past three years, the cumulative tax on kraft paper has surged from under 50 percent to 111 percent, said KAM CEO Tobias Alando. The Tax regime can be tabulated into:
Export and Investment Promotion Levy: 10%
Excise duty: 55%
Import Duty: 25%
VAT: 16
Import Declaration Fee: 2.5
Railway Development Levy: 2%
Cost Difference Passed to Growers: Approx. 27%
The Kenya Flower Council described the new tax as an unnecessary burden, cautioning that it will increase the cost of doing business for flower exporters.