Bread VAT and excise duty on cooking oil to hit consumers

A customer buys milk and bread from a kiosk. FILE PHOTO | NMG

Photo credit: File | Nation Media Group

One of the most contentious clauses on the Finance Bill 2024 has been the removal of bread from the list of items that are zero-rated for VAT purposes, effectively introducing the tax on the breakfast staple.

Bread is now on a list of zero-rated items that include flour, milk and sanitary products. A 16 percent tax will see the price of a 400-gramme loaf go up by more than Sh10.

In targeting the tax on the food item, proponents of the Bill have argued that its zero-rating is misplaced since it benefits the middle class rather than the low income households.

Those against the bread tax include the Institute of Certified Public Accountants of Kenya (ICPAK) and the Anglican Church, who argue that the tax will hit those with the least capacity to pay.

The church also asked MPs to remove altar wine and unleavened bread from the list of items that attract 16 percent VAT.

The Finance Bill is also imposing excise duty of 25 percent on crude palm oil and finished cooking oil, a development that has been opposed by the Kenya Association of Manufacturers (KAM) and the Association of Edible Oil Manufacturers.

KAM said in its submission that the levy, combined with a 10 percent excise on plastic packaging materials and a Sh150 per kilogramme eco-levy on plastic packaging will raise the retail cost of a litre of cooking oil by Sh168 to an average of Sh468 per litre.

The edible oils manufacturers said the higher taxes will push some out of business, risking part of the estimated 10,000 direct jobs the sector provides today.

The association added that there will be a knock-on inflationary effect in the food industry considering that cooking oil is a fundamental ingredient.

KAM said the planned taxation this might discourage local value addition while the resultant high prices will make Kenyan products less competitive on the international market.

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