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February 21, 2019

Negotiate new IMF terms to cushion the taxpayer

The International Monetary Fund (IMF) logo at the IMF headquarters. /AGENCIES
The International Monetary Fund (IMF) logo at the IMF headquarters. /AGENCIES

It is clear that the entire country is outraged by the 16 per cent value added tax on petroleum products. More so, because it will directly translate to an increase in market prices as a result of high transportation and production costs.

VAT on petroleum products was first introduced under the VAT Act of 2013, with a three-year grace period to come into force in 2016. It was further postponed by two years to September 2018.

The country is now agitating for the tax to be postponed further, but to what end? With the cost of living rising constantly, is it better to embrace the taxation while we still can or postpone the inevitable?

Tax on petroleum is one of the conditions proposed by the International Monetary Fund for Kenya to receive a standby loan procured to cushion the country from external shocks — even though CBK governor Patrick Njoroge believes we do not really need the loan at the moment.

Without the loan, the shilling stands to lose its value, with the potential ripple effect on the economy, including high import bills and higher loan repayments. It might also lead to credit downgrading from global rating firms, thereby reducing our borrowing capabilities.

What we need to do is negotiate new terms with the IMF—terms that will achieve the same goal of higher revenue to offset the country’s debt, while at the same time ensuring Kenyans do not feel punished by high tax.

Quote of the Day: “If you can’t feed a hundred people, then feed just one.”

Mother Teresa

The Albanian born Indian nun, founder of Missionaries of Charity and Nobel laureate died on September 5, 1997.

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