Momentum builds against VAT law as President Uhuru Kenyatta warns traders

President Uhuru Kenyatta has a word with the Director of the International Monetary Fund (IMF) African Department, Ms Antoinette Sayeh, after the official opening of a conference dubbed “Kenya’a Economic Success, Prospects and challenges” at the Norfolk Hotel, Nairobi, Tuesday.  [PHOTO: PSCU/STANDARD)

By MACHARIA KAMAU and ALPHONCE SHIUNDU

KENYA: President Uhuru Kenyatta Tuesday warned unscrupulous traders to stop exploiting consumers as Parliament held an emergency debate on the high prices of goods occasioned by the VAT Act.

The President blamed traders for hiking prices of basic commodities that were not subject to the new tax, a day after the opposition CORD vowed to sponsor amendments targeting the law that came into force early this month.

He instructed the Treasury to issue regulations interpreting the Value Added Tax Act. “I have instructed the National Treasury to publish regulations clarifying the law. We are sensitive to the vulnerable. Basic commodities such as milk, flour and bread are exempt from VAT,” said the President.

“Our objective in implementing this law was to simplify the tax regime, cushion the poor and increase revenues. Whereas the VAT law is very clear in its design, there have been questions as to how it has been interpreted,” he added.

The President used an economic forum jointly organised by the government and the International Monetary Fund in Nairobi yesterday to debunk speculation that the IMF and other development partners heavily influenced the legislation.

In Parliament, MPs called for amendments to the Act to exempt processed milk, books, newspapers and animal feed from the newly enacted 16 per cent VAT.

Mr Chris Wamalwa (Kiminini) initiated debate during the hour-long emergency sitting, and asked the ruling Jubilee coalition to back the amendments.

“If the production costs are high, the prices (of goods) will go up. In future, the local factories are going to close down and once that happens, we’re going to have a severe case of unemployment,” said Wamalwa.

Bipartisan push

The MP urged a bipartisan push to address the plight of Kenyans, saying suffering knew no political boundaries.

“Exercise books are very expensive. The price of newspapers has gone up, yet newspapers provide information and provide oversight, and even the advertisement of jobs happens in the newspapers. I used to buy three newspapers, nowadays I only buy two. And if an honourable member can feel the pinch, what do you think the ordinary mwananchi is feeling?” posed Wamalwa.

Mr Peter Kaluma (Homabay Town) sensationally claimed that 80 per cent of the milk production in the country is linked to firms associated with President Kenyatta and his family, and therefore the increase in tax was akin to enriching the First Family.

Mr John Mbadi (Suba) lashed out at his colleagues from the ruling coalition: “The Jubilee Government has let down this country. They must realise that this is a presidential system of government; they should not be government apologists.”

The MP said the Kenyan market was distorted and any sort of price increase was likely to push the price of goods beyond the reach of Kenyans.

Under siege

“Our responsibility as parliamentarians is to protect all Kenyans and ensure the laws are for both the poor and the rich,” said Mr Manson Nyamweya, who added that the government risked losing a substantial portion of its revenues, given the price increases.

Nyamweya said many consumers would stop buying some goods because their disposable income was under siege by the high taxes.

The MPs said the influx of substandard goods into the country would increase, because Kenyans would be unwilling to buy expensive local goods. They asked the Kenya Revenue Authority and the Kenya Bureau of Standards to tighten surveillance on imports.

Minority Leader Francis Nyenze said the government should consider “other easier ways” of getting revenue, and not pile pressure on wananchi.

Majority Leader Aden Duale charged that Opposition MPs were present when the House approved the VAT Bill, but CORD MPs shouted him down saying Jubilee had muzzled the Opposition.

“This government must act urgently, because a hungry man is an angry man. Kenyans don’t understand the language of CORD and Jubilee. They are suffering. Let us stop living in this ivory tower when Kenyans are suffering. You must do something to ameliorate the suffering of Kenyans,” said Ms Millie Mabona (Mbita).

Mr Ken Okoth (Kibra) said the taxes had hit the poor in his constituency, which harbours Kibera, one of the largest slums. He said computers and all educational material should be exempt from VAT.

“The education of our children is not an expense. It is an investment. We need to amend the VAT Act to make sure the matter is addressed,” said Okoth.

Any of the MPs can now bring a Bill bearing the amendments to the House.

Review Act

At the IMF economic forum, Treasury Cabinet Secretary Henry Rotich said after reforming the VAT law, there would be a review of the law on income and excise tax.

“We thought review of the VAT Act was a priority,” said Rotich. “Compliance was low and subject to abuse and the government has been losing tax revenues. We are now embarking on reforming the income and excise taxes and this will be done within the legal framework,” he said.

There has been a blame-game over the rise in the prices of consumer goods, including bread, maize, wheat flour and other VAT-exempt items, with manufacturers and retailers blaming each other for the price surges.

The price of essential commodities like processed milk, animal feed, electricity and cooking gas shot up after the new VAT Act came into effect.