It comes as a relief to already hard hit households and low-income earners that new Value Added Tax (VAT) Bill, to be discussed by Parliament, will not include putting food on the list of those items to be taxed.
While we are alive to the fact that the Treasury has limited options when raising tax revenue, including the fact that a large bulk of the economy is still informal and therefore not registered tax payers, bringing food items such as maize and wheat flour under VAT is unpopular and punitive.
Huge burden
One viable option remains finding a way of widening the tax, bringing such people as legislators under the tax bracket. It is also time for tax authorities to make all informal business regular without unnecessarily putting a huge burden on the vulnerable poor.
There is a feeling that the Government should concentrate on widening the tax bracket to include all people instead of putting more items under VAT.
Kenya Revenue Authority ( KRA) ought to come up with a way of having a single point of taxation so that those who are charged pay as you earn or income tax should not also pay VAT, a case of double taxation.
When the VAT Bill comes for debate before Parliament, we expect our MPs to put their discussions in deep thought and consideration, given the impact this piece of legislation will have on the economy in general.
It is important to note that the VAT Bill has a reduced list of zero-rated items. A vast number of items currently zero-rated, such as food items, will now be standard rated at 16 per cent. It is due to intense lobbying by civil society that food has been removed from the list. Items that could have been affected include milk, rice, bread and wheat flour.
But with food items eliminated from the list, we expect the price of fertilizers, LPG and computers to go up if the Bill becomes law.
The list of exempt goods is also vastly different under the new VAT Bill and includes kerosene which is currently zero-rated.
It is unfortunate that the debate surrounding the new VAT bill has concentrated on food items without looking at what will happen to the price of mobile phones, newspapers and books which will now be standard rated at 16 per cent.
The new VAT Bill also proposes to remove the 12 per cent tax on electricity and industrial oils, replacing this tax band with a 16 per cent standard rate.
