PKF Kenya tax partner Michael Mburugu (left) and chief executive officer Atul Shah during a pre-budget media briefing on June 6, 2016 at Intercontinental Hotel in Nairobi. PHOTO | SALATON NJAU| NMG
Basic items set to cost more include maize, bread, cassava and wheat flour, milk, some farm inputs and cooking gas
Others are medicaments such as vaccines for human and animals and raw materials for pharmaceutical manufacturers
This is if the legislators endorse the Tax Laws (Amendment) Bill, 2018, a government-sponsored Bill
The cost of food, cooking gas and farm inputs is set to rise on proposed changes to the VAT Act, further raising the cost of living for poor households.
Basic commodities set to cost more include maize, cassava and wheat flour, bread, milk and cream without sugar concentrates and other sweeteners, farm pest control products and liquefied petroleum gas.
Others are medicaments such as vaccines for human and animals, raw materials for pharmaceutical manufacturers and supplies to marine fisheries and fish processors.
This is if the legislators endorse the Tax Laws (Amendment) Bill, 2018, a government-sponsored Bill which went through the first reading in the National Assembly on April 18.
Tax consultants on Monday asked the legislators to reject the amendments to the Value Added Tax (VAT) Act which seeks to tax a number of basic commodities, presently zero-rated and exempted from the standard 16 per cent VAT.
The proposed reclassification of the commodities from VAT zero-rated to exempt will result in a wave of price increases.
“What it means to exempt from VAT is that manufacturers cannot recoup the input VAT… and they will factor it in pricing mechanisms,” PKF Tax Partner Michael Mburugu said.
“The government is being short-sighted in… trying to use exemptions to deal with issues of VAT refunds, but we don’t believe unnecessary VAT refunds should be an issue in an era of iTax because everything, including invoices, are documented in the system.
“We are surprised that the government is talking of the Big Four agenda in manufacturing, healthcare, sustainable food supply, but the miscellaneous bill seeks to make it more expensive by exempting (from VAT),” Mr Mburugu said.
Kenya Revenue Authority Commissioner-General John Njiraini said zero-rated VAT will be restricted to exports and only extended to goods for domestic use in “very unusual situations”.
“The problem with zero-rating is that you can’t always assure that the benefits pass on to consumers,” Mr Njiraini said on May 8.
“When we reviewed the VAT Act in 2013, the idea was to restrict zero-rating to exports but then there has been some retrogression because of political issues here and there.
“We have started the journey to go back to the right thing.”
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
