There is concern that the sudden enforcement of the VAT Act 2013 could lead to a resurgence of a black market. Besides the increased cost of processed milk, books and cooking gas, the cost of key services has also shot up.
Tourism and hospitality industries are some of those directly hit within the services sector. Others like transport and ICT have been affected indirectly
Travel and leisure firms have moved to adjust the cost of their services. Hotel chain TPS Serena East Africa has notified its clients of a rise in the cost of its tour packages. The listed company said its cost of game drives has gone up. "Air and ground packages prices as well as game drives prices ( non package arrangements) have been reviewed as with effect from 2nd September 2013," the firm said.
Tourists are also likely to face increased cost of meals that have indirectly been affected by the high cost of cooking gas, oil and processed milk. Leaders in services industry have taken to social media to criticise the new levies. "VAT on milk, books and other essentials is not a wise move," said outgoing general manager of Mombasa-based Sarova Whitesands Hotel Mohammed Hersi on his Twitter handle.
"Government ought to have gotten frugal, cut on wastage and need not tax us more." Nokia's global head of marketing activation for mobile phones, Ken Oyolla, warned new taxes on mobile phones that were only exempted four years ago would be a boost to black market.
"Counterfeit mobile phones will thrive again and there could be massive VAT evasion," he said. The rise in cost on foodstuffs and power are further set to have dire ripple-effect to the consumerbased economy. Consumer Information Network has said the upward adjustment in prices of agricultural inputs and power would sweep across all sectors of the economy.
"We have in the past heard of dangerous concoctions being sold as processed milk and fertilisers," the lobby said in a statement. "Counterfeit, adulterated or fake commodities pose major risks to consumer safety."