MPs angry at planned changes to VAT rates

By ANTONY GITONGA

You should expect to begin paying more for essential commodities if tax measures being proposed by Government are implemented to the letter.

This is the cold hard truth at the heart of the draft Value Added Tax Bill expected to come before Parliament for deliberation next week.

Lawmakers who have seen the Bill are up in arms at the proposed changes to the VAT law. There are proposals to increase what you pay as VAT despite the burden of a high cost of living.

Zero-rated goods like maize and wheat flour, milk, bread, sanitary towels, infant formula, exercise books, and farm inputs could all attract 16 per cent VAT. But kerosene, mosquito nets, and electrical appliances, including generators, are among zero-rated good, which will be exempt.

Electricity bills could also soar because levies on power, which are now at 12 per cent, would rise to 16 per cent. Drilling for water is among the zero-rated services that will become taxable at 16 per cent.

Zero-rated

The VAT Bill proposes two rates of taxation: 0 per cent for zero-rated supplies, and 16 per cent for any other supply. It scraps the lower VAT rate of 12 per cent.

Finance Minister Njeru Githae will formally introduce the Bill in Parliament on Tuesday, when the House reopens. The changes are part of Treasury’s plans to raise the Sh1.5 trillion required for the Budget this financial year.

Over 30 Members of Parliament are urging the Government to withdraw the controversial Bill to allow further consultations. They described attempts to introduce 16 per cent VAT on previously zero-rated or tax-exempt goods and services as “a recipe for riots”. The MPs, who met in Naivasha, questioned why the Bill was being rushed while various groups had expressed reservations.

Earlier agrochemical manufacturers, importers, and distributors said they were opposed to plans to levy VAT on agricultural inputs. Members of the Agrochemical Association of Kenya termed the VAT Bill a direct threat to food security and the agricultural industry. They say it will result in a dramatic increase in prices of inputs, such as agrochemicals, fertilisers, and equipment.

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