Life just became more expensive dear MP while you were snoozing

 

The VAT Act 2013 has significantly hurt the Kenyan farmer by taxing raw materials of animal feed and the feed itself, yet exempted unprocessed milk and meat from tax, consequently hurting the mwananchi. FILE 

By  CAROL MUSYOKA

In Summary

• The VAT Act has seen the price of food commodities rise as farmers pass this on to consumers.

A bus load of politicians were driving down a country road one afternoon when all of a sudden, the bus ran off the road and crashed into a tree in a farmer’s field. The old farmer went over to investigate, then he proceeded to dig a hole and bury the politicians.

A few days later, the local sheriff came out, saw the crashed bus, and asked the farmer, “Were they all dead?” The farmer replied, “Well, some of them said they weren’t, but you know how them politicians lie.”

Last week, I started a brief lesson for the 349 members of Parliament who were out of office when Tornado VATA hit Kenya, leaving behind catastrophic destruction of the mwananchi’s cash flow in its wake.

Just in case you missed it, Tornado VATA was the VAT Act 2013 that blew through Parliament a few weeks ago, completely unnoticed by the honourable occupants.

(READ: Why MPs were fast asleep when tax Bill sailed through)

So to my dear parliamentarians, here is another thing you missed while you were away.

You significantly hurt the Kenyan farmer and consequently hurt the mwananchi as you snoozed during the passing of the Act.

A farmer rears animals that are converted into food — meat, milk and eggs. The farmer has to buy animal feed, especially if he/she is into commercial production. Animal feed usually consists of about 80 per cent of his production costs.

Let me make it a little simpler. That chicken drumstick, T-bone steak or pork sausage that you are going to eat in the parliamentary restaurant today originally came from an animal. There are various costs that are borne by the producer of the meat you are about to eat.

One of these is VAT, which is discussed in terms of output and input VAT to those who are in the production of goods and services.

There are three kinds of VAT outputs. First, your goods can have a 16 per cent VAT output, which is simply 16 per cent charged over and above what the price of the goods is.

Secondly, your goods can have a zero rating VAT output, which means that your goods attract a zero rate of VAT.

However, zero rating allows for the seller to claim back from KRA whatever VAT he/she has paid in the raw materials or input used to produce goods, known as input VAT.

KRA, in its undeniable generosity, allows you to make this claim and then spends the rest of your uncertain life assuring you that you will be paid the refund claim.

In the meantime, your buyers get to enjoy your zero-rated goods without paying for the 16 per cent input cost that you endured when you bought the raw materials.