New VAT law set for review

PHOTO | FILE Protesters along Nairobi's Kenyatta Avenue on July 02 2013. They were protesting against the VAT Bill which seeks to impose taxation on essential commodities.   NATION MEDIA GROUP

In Summary

• The VAT Act, effected as part of the government’s efforts to increase revenues, came into force last month, imposing 16 per cent levy on thousands of goods and services that had previously been tax exempt or zero-rated.
• While the National Treasury cabinet secretary Henry Rotich said basic consumer goods were exempted from the new levy, retailers have since increased prices for almost all products.

By CAROLINE WAFULA
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The Speaker of the National Assembly, Justin Muturi, has given the green light for amendments to be made to the newly enacted VAT Act immediately, raising hopes for a drop in the cost of living.

Exercising powers bestowed on him by the parliamentary Standing Orders, Mr Muturi on Tuesday exempted the VAT Act from the six-month period required by law for the amendment of a legislation.

The Amendment, sponsored by Suba Member of Parliament John Mbadi, seeks to exempt some basic commodities from taxation citing the high cost of living and burden to cash-strapped consumers.

“We are glad that the Speaker found the matter important and treated it with the urgency it deserves.
This will now allow the Parliament to start debate on the amendment soon,” Mr Mbadi said.

The proposed amendment has now been forwarded to the House Budget Committee for review before being presented in Parliament for debate.

INCREASE REVENUE

The VAT Act, effected as part of the government’s efforts to increase revenues, came into force at the beginning of the month, effectively imposing 16 per cent levy on thousands of goods and services that had previously been tax-exempt or zero-rated.

While the National Treasury Cabinet Secretary Henry Rotich said basic consumer goods were exempted from the new levy, retailers have since increased prices for almost all products, forcing consumers to dig deeper into their pockets.

Amidst confusion on which commodities are exempt and which are not, traders resorted to imposing price hikes of up to 16 per cent on almost all basic consumer goods.

The proposed amendment now seeks to exempt infant milk, processed milk, mosquito and fishing nets, insecticides, fungicides and herbicides from VAT.

Other goods and services proposed to be exempted from taxation include vegetable, newspapers, journals, postal and water drilling services.

If successful, the amendment will also exempt electricity supply to households and services offered by the Rural Electrification Authority.