Traders ignore directive on VAT

Supermarkets were Wednesday still charging higher prices for most basic commodities despite the taxman listing the items that are exempt from value added tax.

A statement by the Kenya Revenue Authority Wednesday said it was illegal to charge the tax on goods and services listed as exempt or zero-rated.

PRESIDENT'S DIRECTIVE

This followed a directive by President Uhuru Kenyatta for clarification on the law.

Items exempted include unprocessed foods such as milk, maize and wheat flour, bread, eggs, meat, medicine and beans.

VAT should only be charged by businesses with an annual turnover of least Sh5 million, the taxman said.

At Nairobi’s Nakumatt, Uchumi and Tuskys supermarkets, some retailers had slapped a blanket increase in prices.

Nakumatt coordinator Wilfred Kimani said prices of basic commodities had gone up because of tax.

“The suppliers gave us a list of new prices which left us with no option but to raise prices. If there is then a new directive to reduce prices, we are yet to get the communication,” he said.

Mr Abel Morombwa, the manager at Uchumi Koinange, said their suppliers raised prices once the VAT Bill was assented to by the President.

A loaf of bread, for example, is selling for Sh48, up from Sh42 even though bread and wheat flour are tax exempt.

Eggs shot up to Sh420 a crate, up from Sh360, yet eggs are unprocessed and should be exempted from the tax.

National Treasury Cabinet Secretary Henry Rotich warned traders breaking the new law that they risked prosecution.

Nakumatt Lifestyle manager Herman Majengo said the increase in prices was not caused by taxes but by other factors such as supply and demand.

“We cannot completely rule out the effects of VAT on prices, but other factors such as scarcity of goods play a part. We do not just wake up and increase prices. The suppliers compel us to increase prices if we are to make profits,” he said.