8 August 2012

Kenya: Treasury Amends Vat Bill After Public Protest

Photo: Capital FM
Dujis MP Aden Duale said the aggressive tax law will only increase the cost of living and inflation for ordinary Kenyans.

The government seems to be bowing to pressure to review sections of the VAT Bill 2012 with finance minister Njeru Githae yesterday indicating that some l aspects of the Bill 2012 that has attracted criticism from various sectors will be amended. Githae disclosed that cabinet had approved that proposed VAT on food items be removed.

"During our cabinet meeting it was agreed that we remove VAT on items related to food and we are going to do that at the committee stage of parliament," explained the Minister. Other areas likely to also benefit from amendments to the bill proposal include tax on seeds and primary school books, Githae said.

He however backed majority of the proposals contained in the bill arguing that it would make administration of VAT easier for manufacturers and exporters and will lead to better business accounts management with the removal of refunds.

Under the proposed bill, prices of essential food items such as bread, sugar and milk among others were set to go up with the inclusion of VAT on the retail price.

Also agricultural inputs such as pesticides and fertilizers have also been roped in the VAT threshold after years of exemptions aimed at spurring growth in the sector seen as the country's economic backbone.

Majority of Ps have threatened to shoot down the Bill if the objections raised by different industry lobby groups are not deliberated before the Bill is debated in parliament.

"There is a misconception about the purpose of the Bill. It will not just increase prices of some items that were not vated to vatable. It brings with it a lot more reforms to manage VAT," said Githae. "We are listening to views that people are bringing forward," he assured.

Central Organization of Trade Unions, Kenya Tourism Federation, Farmers and Agrochemical Association of Kenya are some of the lobby groups that have recently voiced their concerns over the Bill's implications.

The finance minister has however hinted that items will are likely to be taxed or exempted as a group and not single items to make the management of this tax easier as intended in the first place.

For instance he said, MPs wanted removal of VAT on exercise books which could be clumped together under a primary school books category and the entire category exempted from tax.

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