VAT bill stirs up storm as MPs vow to block it
Three MPs have threatened to move a motion of no confidence against the minister for finance Njreu Githae and Planning minister Wycliffe Oparanya over the move to impose 16 per cent tax on food and general consumer products through the consolidated Value Added Tax bill 2012. Legislators Charles Kilonzo, Fred Kapondi and Adan Dualle said said if implemented in its current form, it could rapidly erode progress made in improving the economy and kill hopes of large scale investments in projects under the Vision 2030.
Dualle said the proposed 16 per cent VAT on all basic food stuffs including maize, wheat and milk is a recipe for social chaos and could lead to increased crime as families seek survival alternatives. Diamond Lalji, the chairman of Cereal Millers Association warned that pegging VAT for seeds, fertilisers and transportation of unprocessed agricultural produce to markets at 16 per cent, would hurt the production chain.The Kenya Federation of Agricultural Producers has written to parliament seeking the intervention of MPs. The bill proposes a standard rate of 16 per cent for products and services previously either zero-rated or tax exempt and is expected to be tabled in parliament when it resumes its sittings today.
According to the MPs, VAT measures in the proposed law would dangerously affect food security, as a direct result of farmers abandoning their fields due to prohibitive costs of production of fertiliser, seeds, pesticides, farm implements, all be subject to 16 per cent VAT. "This is like taxing poverty," said Dualle. "Imagine what will happen if the generic medicines that we rely on will have an additional 16 per cent price tag"
They argued that the scrapping of VAT remissions on capital investments will keep off investors from the Konza ICT city, the Lamu-port-South-Sudan Ethiopia transport corridor (Lapsset), and power projects alongside other infrastructure opportunities, most of which the country has been marketing as its Vision 2030 flagship projects. "We suspect these are some of International Monetary Fund and World Bank plans to push the country back on begging knees" said Kilonzo. Books and academic materials are among those to be affected by introduction of 16% VAT. “This will push consumers to desperation,” said Stephen Mutoro, the secretary general of the Consumer Federation of Kenya