State intends to tax basic commodities, says Rotich

The controversial Bill which proposes a 16 per cent Value-Added Tax (VAT) on bread, maize flour and other basic commodities is a priority for the National Treasury, if only to ensure that the taxman meets his revenue targets.

That was the plea of the Cabinet Secretary of the National Treasury, Mr Henry Rotich, when he met the Budget and Appropriations Committee for the final meeting before the tabling of the committee’s report in the House.

Mr Rotich told the MPs at closed-door meeting in Nairobi’s Boma Hotel that there were revenue leaks in the current VAT Act that need to be closed.

According to the taxman up to Sh11 billion is lost under the current regime. Also, businesses have to wait longer to access the tax refunds due to them.

“Members were urged to pass the proposed VAT Bill when it comes to Parliament as the proposed new measures would assist in recouping losses,” read part of the minutes of the meeting held last week, just before the committee tabled its report in the House.

The push to have MPs approve the VAT Bill re-opens another front for a push and pull between the lawmakers and the rest of the public, especially, the poor, who think life will be expensive if basic commodities are taxed.

The VAT Bill proposes to slap a 16 per cent tax on basic commodities that are hitherto untaxed such as sanitary towels, newspapers, journals and periodicals, rice, wheat flour, bread, wheat, computers and computer software and processed milk.

Domestic electricity consumption, water drilling services, and landing and parking services for aircraft were also going to be taxed.

But as the National Assembly gets ready to debate the Bill, lobby groups are also getting ready to have items such as maize flour, bread and processed milk removed from the list of items to be taxed.

They have launched a campaign dubbed “No Unga Tax” to ensure that the MPs protect the low-income earners.

Taxing basic commodities is a sure way to increase revenue collections for the taxman, but it portends economic tears for the rest of the public.

The inflation for the first half of the current financial year was recorded at 5 per cent, and if the taxman is to be believed, an increase in the inflation rate by just one percentage point means that the taxman will net Sh7.7 billion more for the public coffers.

The lobbies have launched a hotline number to get as many people as possible to sign a petition to show MPs that the public wanted a review of the law. The public can participate by flashing a number 0708318318 free of charge.

According to Blessol Gathoni, one of the organisers, the idea of the petitions is to stimulate debate on the Bill and get the MPs to re-think the law.

The meeting with MPs to lobby for the basic commodities to be exempted is scheduled for next Friday.

So far, 9,000 people from slum areas have signed the petition and more are still flashing the number and leaving their details.