Kenyan State Plans new tax on Food to Raise Cash

State plans new tax on food to raise cash0

In Summary

• The Value-Added Tax Bill will be returned to Parliament for debate and adoption to help boost government revenue to meet increasing expenditure

A tax might be introduced on food and other essential goods as the government seeks ways of raising money to cope with rising demands for higher pay. Read

Though Finance minister Njeru Githae denied that the move is linked to the recent strikes by teachers, doctors and nurses in public hospitals demanding better terms, the timing of the introduction of the Bill suggests otherwise.

It is the same Bill that had been suspended due to a public outcry as it would see 16 per cent tax being levied on essentials, including seeds, fertilisers and books.

The Value-Added Tax Bill will be returned to Parliament for debate and adoption to help boost government revenue to meet increasing expenditure.

The minister said the Bill, which was withdrawn over implications of raising the cost of living, will be brought back to Parliament with amendments.

“We are going to reintroduce the VAT Bill to bring reforms that will remove refunds and rationalise exemptions,” Mr Githae said.

“It will enable the commissioner to offer guidance to reduce disputes that are currently too many,” Mr Githae added.

Passing the Bill has become more urgent after the government conceded to demands by teachers and lecturers to raise their salaries, which will increase the wage bill by Sh20 billion, which had not been budgeted for.

The minister said he was disappointed by the amount of revenue that comes through VAT, which were too low.

Ss Story

“I am very disappointed by the amount of revenue from VAT, which has been declining. In other countries, VAT is about 20 per cent to the Gross Domestic Product (national wealth) but in our case it has been decreasing, even with the expansion of GDP and disposable income.

“It started at 8 per cent and now it is at 4 per cent. There is something peculiar about our VAT,” the minister said.

Several groups, including farmers and educationists, complained that a 16 per cent increase in the cost of seeds, fertilisers and books would further increase the cost of living.

This would hurt the poor more, they added.