MPs are preparing drastic changes to the controversial Value Added Tax Bill 2013 that could see more than 200 essential items, including milk and medicine, spared the 16 per cent consumption tax.
The changes would also remove some punitive sections that empower the taxman to take possession of a taxpayers assets for failure to comply with the law.
“I have been tasked by my party to come up with comprehensive amendments to the existing Bill,” Suba MP John Mbadi said.
“We will go further to remove offensive sections including Section 27 that require the Kenya Revenue Authority (KRA) to take possession of land or buildings and mortgage or charge them if the owner fails to pay taxes.”
Although the instructions were from the minority Coalition for Reforms and Democracy (Cord), Mr Mbadi said they had the support of Jubilee coalition members.
The amendments, he said, would target all basic commodities including medicines and electricity in addition to the maize flour and bread which the government has said will be exempt from tax.
Other essential commodities proposed for exemption or zero-rating include wheat flour, kerosene, fishing and mosquito nets, mosquito coils, sanitary towels, urine bags and other sanitary products, medical equipment, farm machinery, fertiliser and education materials such as exercise books.
“Kerosene is used by the very poor who should be cushioned. We will look to ensure that electricity whose usage is below 200 kilowatt-hours is not vatable,” he said.
The Jubilee coalition, through a Parliamentary Group meeting on Tuesday agreed to initiate amendments to the Bill to reinstate maize flour and bread in the list of items that are zero-rated.
The Bill has reduced the number of goods or services previously exempted or zero-rated from about 400 items to 42.
Mvita MP Abdulswamad Shariff Nassir said that the cost of insulin and syringes used by diabetic Kenyans would skyrocket leading to more deaths if the VAT Bill became law in its current form.
Mr Nassir said anti-malaria campaigns and food security would be compromised if nets, mosquito coils, fishing nets, tractors, disc ploughs and fertiliser became more expensive.
Kibra MP Ken Okoth said that the problem with Kenya was not how to raise revenue but tax collection.
“There are tax loopholes and KRA is not sealing them. There are a lot of tax holidays given to corporations yet you want to tax poverty instead of fixing collections and use the tax well,” he said.
Mr Okoth said that the amendments will include exemption of computers which have been proposed to attract 16 per cent VAT under the proposed law. The exemption, he said would enable the youth access affordable technology devices to spur innovation.
The amendments would be introduced at the committee stage and, if adopted, leave the government at pains to raise Sh10 billion that the removal of exemptions was meant to realise.
The Bill seeks to repeal VAT Act Cap 476 of 1989 to address challenges in the administration of the existing law enabling tax payers to comply with ease.