Lack of absorption capacity vindicates Budget controller’s concern

Just two months ago, the government lobbied hard to get the National Assembly to pass the VAT 2013 Bill ostensibly to plug a Sh10 billion hole in the 2013/14 financial year. Parliament was won over and the VAT Act 2013 was enacted and became operational last Monday.

Prices of a significant number of essential commodities have soared in the aftermath of the new tax law raising questions about wisdom of its enactment. These questions are fuelled by the Controller of Budget’s report that various ministries and departments failed to spend Sh339.6 billion allocated to them in the year ended June 30, 2013, the very month when the push for the new tax law started.