Cabinet backs down on taxes plan for basic goods

The government has backed down on plans to introduce taxes on basic commodities in the new Value Added Tax (VAT) Bill, which had proposed to end tax exemptions on consumer goods.

The Cabinet on Thursday moved to keep prices of basic essential goods cheaper, after it approved the Bill to zero-rate commodities such as maize, wheat flour, milk, bread and medical supplies.

“The Cabinet reiterated the need to make basic essential commodities affordable by the majority of Kenyans, hence; the decision to zero-rate the goods,” said the Cabinet brief.

However, the brief was silent on whether tax will be charged on textbooks, wooden coffins and charcoal, which are currently exempt as proposed in the initial Bill.

The VAT Bill 2012 also exempts goods and services for export from the tax and gives better dispute resolution mechanisms between tax payers and Kenya Revenue Authority.

It proposes removal of withholding VAT and filing of tax returns electronically. Treasury is counting on it to increase its revenue collection.

Implementation of the new law is also part of commitments the government has given to the International Monetary Fund (IMF), to strengthen its revenue mobilisation and cut over-reliance on foreign funds.

The Cabinet also approved the Companies Bill 2012, which provides for some of the most modern company laws in Africa.

Among the proposals in the Bill is approval of a one-person company registration and the requirement that companies re-register once they move from being a public entity to private or vice-versa.

There has been clamour to change the Companies Act to accommodate new realities like their expansion into East African Community member states.

The other crucial Bill is that governing the bankruptcy of companies.

The Insolvency Bill 2012 proposes to transform the process of company receivership from one lengthy, laborious process to one that gives a company under receivership the chance to revert to normal operations. It also gives clear guidelines and deadlines for the receivership process.

Experts have been expressing concern over the receivership laws that lead to collapse of companies that could otherwise be nurtured to financial health through better management.

They say the current laws do not anticipate situations where firms may go through financial stress due to extraneous factors that they have no control over.