Institute for Development Studies, University of Nairobi

This paper examines the current method of taxation and control of the coffee industry in Kenya and outlines an alternative system aimed at improving the industry's efficiency. Control of the industry has been exercised through a system of acreage quotas which have been fixed since 1963, and taxes have not been made sufficiently sensitive to the wide fluctuations in income in good and bad years. A system of volume control is proposed which incorporates a more flexible system of taxation and should encourage a change in resource allocation to allow production of the desired national coffee output at a lower opportunity cost. The implications of this new system are examined for coffee estates and smallholdings , and the effects on employment and net foreign exchange earnings are discussed.