24 April 2014

Kenya: Bill to Amend VAT Law Passed

Photo: Siegfried Modola/IRIN
Nairobi, Kenya

MPs yesterday passed a bill that seeks to amend the VAT law. The Value Added Tax (Amendment) Bill was sponsored by Suba MP John Mbadi. To be zero rated when the bill is signed into law will include mosquito nets, none concentrated and none sweetened milk or cream.

Also to be zero rated will be materials, waste, residues and by-products used in animal feeding. New items that were not in the original bill that will now be zero rated include unprocessed green tea and air ticketing services by travel agencies.

Also to enjoy zero tax will be inputs on raw materials supplied to pharmaceuticals in Kenya for manufacture of medicines and specialised solar equipment and accessories such as solar heaters. The MPs however adopted proposals by the departmental Committee on Finance, Planning and Trade to reduce the number of items that will be exempted from tax.

Items that the initial bill had proposed to be zero rated but will still continue attracting a 16 per cent VAT include supplies to the Rural Electrification Authority, supply of water drilling services as well as ambulances and hearses.

Other items, which will continue to be taxed include crisp-bread, insecticides, rodenticides, fungicides, herbicides and disinfectants. Also in this list is milk and cream, concentrated or containing added sugar or other sweetening matter.

The parliamentary budget office had advised the committee that if all the items listed in the original bill were to be exempted from tax, the government revenue would be reduced by Sh4.2 billion.

During the amendments at the committee stage yesterday, several MPs attempted to block the removal of water drilling services, ambulance and hearses as well as supplies to Rural Electrification Authority from the list of items to be zero rated.

Mbita MP Millie Odhiambo said it is wrong to continue imposing tax on ambulances and hearse yet the government has failed in its duty to provide such services to the poor. Mbadi said it is wrong for government to continue imposing tax on services related to electricity connection.

He said this is going against the Jubilee agenda of lighting the villages.

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