Former Prime Minister Raila Odinga protests new VAT regime

Former Prime Minister Raila Odinga addresses the press over the new VAT law at a Nairobi hotel. [Photo: Tabitha Otwori/Standard]

By Geoffrey Mosoku

Nairobi, Kenya: The Coalition for Reforms and Democracy (CORD) has protested the implementation of the new VAT law, saying it will hurt the economy and impoverish Kenyans.

CORD leader and former Prime Minister Raila Odinga Wednesday warned that Kenyans can only brace for tougher times ahead if the Jubilee Government does not rethink the new tax regime.

The former Premier further said CORD was advising Jubilee to consider reducing VAT from the current 16 per cent to 14 per cent.

This, he said, is in a bid to encourage more spending and thus spread the net of those who are taxed due to more spending.

“VAT is basically an attack on consumption trends and habits. It is the cruellest way for a government to raise money in an economy that is depressed and underperforming,” he said.

“If the government wants to raise revenue, there are better, less painful ways of doing so without making taxation a burden,” Raila said. The grand-coalition government had zero-rated VAT on some essential and consumer commodities including food and processed milk whose prices have now shot up.

Chain reaction

“There is no doubt a chain reaction of prices will follow as costs of transport go up, cost of farm inputs increase and those who offer services to make the economy run put up their costs as well,” he added.

Raila convened a press conference at a Nairobi hotel last evening to address the issue of VAT as Kenyans begin to feel the heat of the new tax rules that have seen prices of basic commodities rise.

Packed milk, for instance, is now retailing at between Sh52 to Sh55, up from an average of Sh45 in August.

“Soon schools will raise fees because of the growing cost of food and other consumables. The levying of 16 per cent on X-ray and other diagnostic services will deal a severe blow to the health sector since to cut costs and accommodate the poor patients, doctors will cut X-ray services and rely on clinical symptoms which will result in increased misdiagnosis and lots of deaths.”

Suggestions

Accompanied by MPs Junet Mohamed (Suna East) and Manson Nyamweya (South Mugirango), Raila said the opposition would not criticise the government just for the sake of it but will engage in constructive suggestions that seek to provide solutions.

The CORD leader reminded President Uhuru Kenyatta of his budget statement when he was Finance minister in 2009, which had exempted mobile telephones and ICT products from the VAT rule and wondered what had changed since.

“It must be recalled that in his 2009 budget speech, President Uhuru Kenyatta as Finance minister said: ‘Mobile telephones have become an essential aspect of our daily communication and transaction system. To make the telephone sets more affordable, I propose to exempt VAT for all telephones, for cellular networks or other networks. I do hope that dealers will pass this benefit to wananchi by lowering the prices.’ We challenge the President to explain this change of heart,” Raila added.

CORD said the government should find the most logical way of addressing the tax regime and reduce the burden of the ordinary citizen while supporting livelihoods of vulnerable groups through social safety nets.

“In fact, we fear that the increase in VAT may lead to failure by government to meet its revenue targets as people cut down on consumption because they cannot afford.”

As of Tuesday, prices of the most basic commodities had shot up by approximately Sh7.

The subsequent effect has been highly felt in products such as milk and stationery.