Relief as Treasury shelves new VAT Bill until after the General Election
PHOTO | FILE A supermarket worker restocks sugar and other commodities on a shelf. The controversial Bill sought to introduce a 16 per cent tax on fertiliser, maize flour, bread, wheat flour, milk and other basic commodities.
What you need to know:
- The Bill received much criticism and opposition from the public and some MPs
- The government now finds itself in a tight spot as it needs more revenue to meet rising costs
- Shelving the Bill puts the government on a collision course with development partners such as the International Monetary Fund (IMF) and the World Bank, who were backing the Bill
Treasury has shelved plans to reintroduce the controversial Vat Bill until after the next government comes to power.
This is after the Bill received much criticism and opposition from the public and some MPs.
Other factors that conspired to knock down the Bill include the run-up to the General Election, VAT refunds following growing pressure from the public, and lack of enough time to deliberate on the Bill.
Now the government finds itself in a tight spot as it needs more revenue to meet rising costs. (Read: Treasury seeks to raise Sh40 billion in new tax measures)
On the other hand, it needs to keep the cost of basic commodities down.
“There are indications that the Bill will be pushed aside until after the next elections. Right now, the priority is on the county governments Bill and the Finance Bill 2012 that need to be passed to facilitate the devolution process,” said Finance minister Njeru Githae.
Shelving the Bill puts the government on a collision course with development partners such as the International Monetary Fund (IMF) and the World Bank, who were backing the Bill on grounds that it would boost the government’s internal sources of revenue.
The VAT Bill 2012 had attracted a barrage of criticism after it sought to introduce a 16 per cent tax on fertiliser, maize flour, bread, wheat flour, milk and other basic commodities like books. (Read: New Bill set to push maize flour price up)
According to the Daily Nation’s calculations, the price of bread would have risen by Sh6 and maize flour by as much as Sh19. A packet today sells for between Sh116 and Sh130.
The Bill was taken to Parliament for debate and adoption to help boost revenue to meet increasing expenditure, but Treasury has indicated that it comes least on the priorities of Parliament — which resumes next week.
The Cabinet had earlier resolved to remove food items from the intended review of the VAT Bill that would have resulted in an increase in food prices. That hasn’t worked either.
The development confirms earlier fears by the Kenya Revenue Authority (KRA) that Parliament might be caught up in matters relating to the run-up to the General Election, given the deep seated issues which must be tackled to amend the Bill.
“There are no simple solutions to the tax law, especially on issues surrounding VAT refunds and withholding tax,” KRA Commissioner General John Njiraini had earlier indicated.
Mr Githae has said that the Treasury and KRA are likely to remove all exemptions on commodities to ensure equity and fairness.
These, he said, are some of the ensuing amendments before the Bill is reintroduced.
The options available are to amend the Bill when it will be at the committee stage after the next government comes to power after receiving views from the public, or to withdraw the Bill altogether for a new process to start.
