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Value Added Tax Bill 2013 tabled, seeks to zero rate essential commodities

By - | Published Fri, July 26th 2013 at 00:00, Updated July 25th 2013 at 21:20 GMT +3

By Standard Team

KENYA: The controversial Value Added Tax (VAT) Bill 2013 has been tabled in Parliament for the second reading.

It emerged that the list of goods and services to be exempted have been expanded.

Ainamoi MP Benjamin Langat, who is the chairman of the parliamentary Committee on Finance and Trade, tabled the Bill that seeks to zero rate taxation on essential commodities including milk, bread, maize flour, wheat and Kerosene.

Other than foodstuffs including maize flour and bread, the Bill seeks to zero rate fertilisers, plants and machinery including agricultural machinery (ploughs), live animals, various seeds, pyrethrum flower, edible vegetables and roots tubers, unprocessed milk, fish, certain cereals such as maize, rice, sorghum and millet.

A large array of foods, petroleum products such as aviation spirits, motor spirits and financial services among others have also been proposed to be put under zero rated or VAT exemptions. He said the rationale for an expanded list of exempt and zero rated goods in the current act was to cushion low income earners against skyrocketing prices of basic consumer goods.

The Committee unanimously agreed there was need to reduce the number of zero rated or exempted goods from 700 to a modest and manageable number.

Basic commodities

“The Committee was in agreement that basic commodities likely to be used by the low income earners on a daily basis be either exempted from tax or be zero rated,” the report states. But the Committee felt there were sensitive areas which needed to be protected from cheap imports.

“The extractive industry- specifically mining, geothermal and energy, dairy industry are some of the areas identified in that category,” Langat said. He said it was the feeling of stakeholders that the extraction industry is significantly a high risk investment and VAT on inputs for the mining industry was likely to increase the cost of investment and discourage investors.

Langat said it was the feeling of Kenya Airways and the aviation industry that excluding the industry from zero rating and exemption of VAT would impact negatively to training.

“The committee heard that the proposed VAT changes affecting the aviation industry, some of which include standard taxation on purchasing and hiring of air crafts,” he said.

“The committee acknowledges that aviation sector contributes to Gross Domestic Product (GDP) and contributes Sh10 billion in taxation besides employing 46,000 Kenyans,” the report states.