MPs oppose Yatani bid to pluck cooking gas from VAT-exempt list

MPs have rejected a proposal by the National Treasury in the 2020 Finance Bill to remove liquefied petroleum gas (LPG) from tax-exempt goods under VAT.

The move by the National Assembly’s Finance and National Planning Committee also includes materials for the manufacture of automotive and solar batteries.

The MPs’ action now means that the Treasury may have to look elsewhere to raise Sh320 million to finance the Sh2.7 trillion budget that Finance CS Ukur Yatani read on June 11.

The proposals by the committee chaired by Kipkelion East MP Joseph Limo will be good news to consumers if the bill is passed as recommended in the panel’s report.

REDUCING BURDEN

The bill, which contains proposals from the national government on revenue-raising measures to finance its annual expenditure, is expected to be passed by Thursday next week before it is handed over to President Uhuru Kenyatta.

The committee notes that it rejected the Treasury proposals after listening to presentations from various organisations and wananchi.

Lawmakers took into account the need to ensure that citizens are not overburdened amid the Covid-19 pandemic that has prompted companies to cut jobs and led to reduced spending.

The Treasury had also proposed to raise Sh8 billion by imposing 14 percent standard rate tax on the items that had been removed from the tax-exempt list.

The items include some helicopters and aeroplanes not exceeding 2,000kg, tractors, other than road tractors for semi-trailers, aircraft pneumatic tyres and goods for clean cooking stoves.

EQUITY AND FAIRNESS

The others are stoves, cookers, barbecues, one motor vehicle imported by a returning public officer from a foreign posting and services such as hiring helicopters.

“Those who made presentations before us said the cost of the proposals by the National Treasury will be borne by the final consumers, who currently have limited financial resources due to the negative effects of Covid-19 disease. This proposal was adopted by the committee,” reads the committee’s report now under debate by the MPs.

Only maize (corn) seeds and ambulance services had been retained in the VAT-exemption category, in a move likely to result in a tax expenditure of about Sh20 million.

The Treasury proposals were also a reintroduction of the provisions that had been proposed in the 2020 Tax Laws (Amendment) Bill, but which were dropped by MPs as they “were deemed to go against the equity, fairness canon”.

However, if the committee’s proposals are shot down, the price of LPG will shoot up, as will that of ordinary bread.

The cost of solar batteries as well as inputs of raw materials for electric accumulators and separators, including lead separator rolls supplied to manufacturers of automotive, will also go up.

PRESIDENTIAL RESERVATIONS

President Kenyatta has declined to sign previous finance bills into law and has instead referred them back to the National Assembly with a memorandum complete with text on how the specific provisions of the bills should be read for the MPs to consider.

In all instances, MPs have failed to marshal the required two-thirds majority, or at least 233 of the 349 MPs, to overturn the President’s memorandum.

With the country facing a difficult time raising revenue to finance the ambitious budget, it is likely that the President may reject some of the recommendations in the committee’s report but only if adopted by MPs in the current form and without amendments.

MPs also adopted an amendment to the Miscellaneous Fees and Levies Act to include an exemption on imports of goods to be used to manufacture products for the fight against Covid-19.

FACE MASKS

These include face masks as Export Processing Zones (EPZ) are importing goods to manufacture essential items in the fight against the disease.

“Adding 2.5 percent on the products purchased is likely to increase the cost of manufacturing such goods and hence hamper the government’s fight against the disease,” the committee’s report reads.

MPs have also recommended that the upper threshold for income subject to rental income tax be increased from Sh10 million to Sh15 million.