You can't tax bread and boda bodas — MPs

Lawmakers cite tough economic times presented by Covid-19 pandemic

In Summary

• Finished iron and steel products to be imported at 25 per cent excise duty.

• Inputs in the manufacture of diapers to be duty-free for a further one year. 

A loaf of bread in a Kenyan supermarket.
NO TAX: A loaf of bread in a Kenyan supermarket.
Image: FILE

A team of MPs yesterday shielded Kenyans from expensive loaves of bread after they rejected Cabinet Secretary Ukur Yatani's proposal to raise VAT on the staple.

The Finance committee, chaired by Homa Bay Woman Representative Gladys Wanga, recommended that provisions to raise VAT on bread be deleted from the Finance Bill, 2021.

The proposal sought to impose higher taxes on bread, motorcycles, imported jewellery, betting and nicotine pouches to fund President Uhuru Kenyatta’s Sh3 trillion budget.

But Wanga's team shot down some of the proposals, citing the economic tough times.

MPs want zero-rated taxes charged on the supply of maize flour, cassava flour, wheat and maize flour containing cassava flour.

“Bread is consumed by a majority of Kenyans who are already struggling with the negative current economic climate as a result of the Covid-19 pandemic,” the committee said in its report tabled in the National Assembly on Tuesday.

“The committee supported to retain the zero-rated supplies to ensure that the price of ordinary bread is not affected.”

They further argued that the subsequent increase in the price of bread ran counter to the government’s Big Four agenda pillar on food security.

The lawmakers have also recommended that the proposed 15 per cent excise duty on motorcycles be deleted from the bill.

"The committee is unanimous that we support the boda boda industry, which has employed many Kenyans. We felt there was a need to understand the proposal further," Wanga told the House.

The Finance committee has further proposed that transportation of sugar cane to milling factories be zero-rated.

To shield Kenyans from imports, MPs have proposed to increase the rate of excise duty on imported sugar confectionery from Sh20 to Sh35.

They have also deleted a proposal which would have seen the Treasury Cabinet secretary make regulations to charge VAT on goods without the approval of the National Assembly.

Lawmakers have also sought to exclude from the excise duty, importation of glass bottles from East African community countries.

The committee also recommended that the proposed rate of excise on products containing nicotine be reduced from Sh5,000 per kg to Sh1,200 per kg.

MPs have, however, sought to increase the rate of excise duty from 15 per cent to 20 per cent on telephone and internet data services.

All betting and lottery transactions will attract an excise duty of 30 per cent, up from the 20 per cent that was initially proposed in the bill.

Betting tax was scrapped in the 2020 budget-making process.  

“The amendment is to apply excise duty on all betting and lottery transactions, that is betting, gaming, price competitions and lottery, at seven-point five per cent,” the committee says in its report on the bill.

MPs have also sought to delete the proposed extension of the period for keeping tax records from five years to seven years, citing the digital era.

A proposal to charge 16 per cent VAT on disposable plastic syringes has also been deleted from the Finance Bill.

Lawmakers have also sought to make infant foods cheaper, with the recommendation to include food preparations suitable for infants under exempt status.

Clean cooking stoves, fishing supplies and plant, as well as materials and machinery used for the manufacture of such goods, will now be under exempt status.

The same will apply to fish feeding and handling; items used in water operations, cold storage, fish cages, pond construction and fish processing.

It will involve items imported or purchased for direct and exclusive use on the recommendation of the relevant state department.

In the new changes, MPs have also provided that overpaid tax will now cater to future tax liabilities accrued by a taxpayer.

MPs have also deleted the proposed provision for concurrent civil and criminal proceedings on tax disputes, saying the court has rules and procedures that deal with such matters.

Taxes would however be charged on carrying out business over the internet or an electronic network, including through a digital marketplace.

Family trust transactions will also be exempt from stamp duty in the new proposals by the committee, for subsequent approval by the whole house.

Licensed service providers that buy data in bulk for resale will offset the excise duty payable on internet data services at 20 per cent.

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