Consumer price shock as traders apply new law

The sudden price increases caught many consumers — most of whom were heard complaining loudly in the supermarkets — unawares. Photo/File  

By GERALD ANDAE

In Summary

• The Value Added Tax (VAT) Act, 2013, came into effect on Monday, forcing manufacturers and traders to add the 16 per cent charge on the prices of goods.
• The list of goods whose retail prices have risen by at least 16 per cent in the wake of the new law includes books, processed milk and mobile phones.
• Consumer lobby, Cofek, responded to the price increases with a hard-hitting statement that accused President Kenyatta’s Jubilee government of reneging on its campaign promise of reducing the cost of living for ordinary Kenyans.

• Milk traders plan own factories as retail prices rise
• Consumer price shock as traders apply new tax law

A wave of price increases on Tuesday hit Kenya’s consumer goods market as traders included value added tax in the cost of goods that have traditionally been spared of the charge.

The levy, which is a product of the Value Added Tax (VAT) Act, 2013, came into effect on Monday, forcing manufacturers and traders to add the 16 per cent charge on the prices of goods.

The sudden price increases caught many consumers — most of whom were heard complaining loudly in the supermarkets — unawares.

READ: Tough time for consumers as Treasury rolls out VAT law

The list of goods whose retail prices have risen by at least 16 per cent in the wake of the new law includes books, processed milk and mobile phones.

READ: Mobile phone prices to rise as VAT law enacted

The price of a 500 ml packet of milk shot from Sh45 last month to Sh52 in some of the supermarkets in Nairobi meaning households have to dig deeper into their pockets to access what is a key ingredient of the breakfast menu.

READ: Milk, books to cost more as Uhuru signs new tax law

Consumers will also pay more to access their favourite newspapers beginning this morning after the publishers increased cover prices in line with the new tax charge.

The Nation Media Group on Tuesday announced that it had increased its cover prices by Sh10 to Sh60 for the flagship Daily Nation, Sunday Nation and the Business Daily.

These price increases are expected to add impetus to inflation pressure that has steadily risen in the past three months to a high of 6.67 in August.

Analysts at AIB Capital expect the new tax measures to push inflation from last month’s 6.67 to 10.17 at the end of this month.

“The new tax definitely widens the government’s revenue base but we expect a spike in inflation,” said Ted Macharia, an analyst with the firm.

“We expect the overall consumer price index to rise from 5.00 points to 145.30 points.” 

Consumer lobby, Cofek, responded to the price increases with a hard-hitting statement that accused President Kenyatta’s Jubilee government of reneging on its campaign promise of reducing the cost of living for ordinary Kenyans.