Kenya's New VAT Row Deepens


web abortion geneva; font-size: small; line-height: 115%;”>He said clarity will ensure unscrupulous people do not take advantage of ordinary citizens by overcharging for essential commodities.

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“We are sensitive to the vulnerable in our country. Basic commodities like milk, flour and bread are exempted from VAT,” he said.

Kenyatta made the remarks on Tuesday while speaking at the opening of a high level conference on Kenya’s economic success, prospects and challenges at a Nairobi hotel.

The conference was convened by, the National Treasury, the Central Bank of Kenya and the International Monetary Fund (IMF).

The President explained that the objective of implementing the law was to simplify the tax regime, cushion the poor and increase revenues.

He further noted that whereas the VAT law is clear in its design, there have been questions about how it has been interpreted and the National Treasury should move in fast to clear the air on the issue.

The new legislation has for the last few weeks been a hot subject of debate after Prime Minister, Raila Odinga, said it would hurt the economy and impoverish Kenyans.

He was quoted by Kenya’s Standard as warning that Kenyans can only brace for tougher times ahead if the Jubilee Government does not rethink the new tax regime.

The former Premier further said CORD was advising Jubilee to consider reducing VAT from the current 16 per cent to 14 per cent in a bid to encourage more spending and thus spread the net of those who are taxed due to more spending.

“VAT is basically an attack on consumption trends and habits. It is the cruellest way for a government to raise money in an economy that is depressed and underperforming,” he said.

“If the government wants to raise revenue, there are better, less painful ways of doing so without making taxation a burden,” Raila said.

The grand-coalition government had zero-rated VAT on some essential and consumer commodities including food and processed milk whose prices have now shot up.

“There is no doubt a chain reaction of prices will follow as costs of transport go up, cost of farm inputs increase and those who offer services to make the economy run put up their costs as well,” said Odinga at a special press conference in Nairobi.

Kenyatta’s views

However, Kenyatta said the law was prepared during the time the former Prime Minister was part of the government and hence should stop blaming the Jubilee government over increased prices on basic commodities.

Speaking in Ruiru Stadium during a special prayer meeting a fortnight ago, President Kenyatta said the Jubilee Government only finalized the law.

“Why are they complaining? The Bill was brought up when they were in government. The Jubilee government only finalized it.”

During the prayer meeting attended by over 45 Members of Parliament, the President told CORD leader to stop politicizing passage of the VAT Act as he was part of it.

The President further warned traders who are taking advantage of the VAT Act implementation to hike prices of basic commodities that a stern action will be taken against them.

He also said traders cannot be justified in the price increments when they fail to remit the required taxes to the Government.


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