An equal rights lobby wants the government to address the huge gap between the rich and poor when Treasury CS reads the budget tomorrow.
“The budget being proposed is for the rich. It will do little to reduce the growing gap between the richest and ordinary Kenyans,” Kenya Fight Equality Alliance, a non-profit organisation, said yesterday.
Proposed amendments to the Value Added Tax Act focus on the exemption of various supplies of some medications, liquefied petroleum gas (LPG), milk and cream and maize flour.
Exemption of these previously zero-rated or standard-rated ( 16 per cent) goods means VAT incurred by suppliers will be passed on to consumers in the form of higher prices since it will not be included as claims of input tax.
“When you make goods exempt, the manufacturers cannot claim their input VAT which will see them put it in the pricing mechanism. That means an exempt item is going to be more expensive than a zero-rated item,” PKF tax partner Michael Mburugu said during a tax forum last week.
In a letter to the clerk of the National Assembly, the Kenya Association of Pharmaceutical Industry also expressed fears the cost of medicine could go up by 40 to 60 per cent should the Tax Laws Amendment Bill be passed in its current state.
Other areas that will be hit by the tax exemption are hotel and housing supplies, supply of natural water, protective clothing, accessories and equipment used in hospitals and firefighting and goods supplied to marine fisheries and fish processors.
“While VAT exemptions are easier to administer, they serve to increase cost of production which in turn leads to higher cost of basic commodities,” Mburugu said.
All eyes will be on Treasury CS Henry Rotich as he presents the Sh2.53 trillion 2018-19 budget allied to President Uhuru Kenyatta’s Big Four agenda.
According to proposals by a parliamentary budget committee, the national government is expected to be allocated Sh1.68 trillion, of which Sh460.2 billion will go towards the Big Four segments - food security, housing, universal health care and manufacturing.
The Judiciary is expected to get Sh17.8 billion, Parliament Sh42.5 billion, while Sh962.5 billion will be set aside for the Consolidated Fund.
Total revenue for the year including KRA collections, appropriation in aid and donor support is expected to be Sh1.97 trillion, leaving a budget deficit of Sh562 billion.