Budget 2018 implications: What to expect

Thursday June 14 2018

Maize flour

A shopkeeper calculates the total price of two packets of maize flour for a customer in Nyeri. FILE PHOTO | JOSEPH KANYI | NMG 

By EDWIN OKOTH
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As Treasury secretary Henry Rotich presents the budget speech today, some of the proposals for financing the spending plan are expected to hit ordinary consumers and high-income earners the hardest.

Here are are some of the specific implications.

  1. Construction materials – More expensive

    To encourage construction of more housing, Rotich is expected to make taxable supplies imported or purchased for exclusive use in the construction of a minimum of 5,000 housing units by a licensed SEZ entity VAT exempt.

    The move expected to make housing affordable will however mean that construction materials suppliers will not be able to claim input tax credits a move that may result into an increase in the cost of such materials.

  2. Suppliers of bottled water – more expensive
    Suppliers will not be able to claim any VAT incurred hence the cost will be borne by the final consumers through a higher cost.
  3. Safety boots for firefighters, and protective clothes used in hospitals and Clinics - more expensive

    Suppliers will pass down their irrecoverable VAT to consumers, a move that may make healthcare more expensive.

  4. Fishing equipment to be more expensive

    The move may affect the blue economy as nets, fish processors and other accessories will be more expensive.

  5. Medicine - May be more expensive

    Some medications and approved inputs or raw materials (either produced locally or imported) supplied to pharmaceutical manufacturers in Kenya for manufacturing medications have also been shifted from zero rating to VAT exempt regime. This is likely to push further prices of the affected medications.

    Ambulances and other emergency relief equipment will also be more expensive under a similar tax regime shift.

  6. LPG – to be more expensive
    Supply of liquefied petroleum gas has also been changed to VAT exempt instead of staying zero rated. Tis may hurt the efforts to promote clean energy to households.
  7. Maize flour

    To be more expensive after a reversal of the zero rating made last year.

  8. Bread

    To be more expensive, Rotich had zero rated wheat flour last year but that is set to change

  9. Pesticides

    More expensive since Agricultural pest control products will no longer be zero rated but VAT exempt instead

  10. Air Travel

    It may also be more expensive to check in travel bags with treasury expected to shift imported passenger baggage including unaccompanied baggage to VAT exempt from the current zero rating.