New Bill to introduce 16 percent levy on foodstuffs

By James Anyanzwa

Farmers and agricultural producers are raising a red flag over a looming food crisis should the Value Added Tax (VAT) Bill become law in its current form.

The concerns come as it emerged that the Bill tabled in Parliament by Finance Minister Robinson Githae, seeks to impose a 26 per cent levy on most zero-rated agricultural and foodstuffs.

The affected items include fertiliser, livestock feeds, insecticides and pesticides, maize and wheat, milk and cream, locally assembled water pumps and locally produced gin cotton.

petitioned treasury

Consequently, the Kenya National Federation of Agricultural Producers (KENFAP) has petitioned Githae to review the Bill before it is debated or MPs should reject it.

Chairman Nduati Kariuki said increasing VAT would lead to higher prices of agricultural inputs and food items. This, he said, would affect a majority of Kenyans who depend on agriculture for livelihoods and other poor people who spend most of their income on food.

Kariuki said Kenya’s export earnings also stand to suffer because the new tax will make local products expensive and therefore uncompetitive in international markets.

“The farmers, agricultural producers and others in the agricultural industry through the Kenya Private Sector Alliance (Kepsa) view with concern certain provisions of the VAT legislation Bill,” Kariuki told the media in Nairobi on Tuesday.

“We urge the Government to amend this Bill and remove any clauses that touch on agricultural inputs and food items.”

He said the removal of agricultural inputs from the list of zero-rated items goes against the spirit of the integration of the East African Community and would harm the agricultural sector in a big way.

“Majority of Kenyans cannot afford any further increase in food prices,” said Kariuki.

Githae, during his 2012/2013-budget statement last month, tabled before the house the VAT Bill 2012 for discussion.

“Treasury has finalised the review of the VAT law to align it to the Constitution by making it simpler and modern based on international best practice,” he said.

“After consultations with key stakeholders, the draft bill was discussed and approved by the Cabinet. I am therefore, pleased through this budget to table the VAT Bill 2012 for debate and approval by this house.

Last year, rising inflation rates adversely affected the country’s poor households’ ability to buy food.

Prices of the main staple, maize, tripled from about Sh1,300 in January 2011 to 4,500 for a 90kg bag.

This forced the government to remove tax on imported maize in a bid to cushion consumers.

But millers said rising global maize prices meant the measure would have little impact on the commodity’s prices locally.