Keep fuel VAT at 16 percent

In Summary

• Azimio want to revert to the Covid-era VAT rate of eight percent on  fuel

• Government raised the rate of VAT on fuel to 16 percent as part of the IMF deal

Talk between the Azimio and Kenya Kwanza coalitions are in their final stages. The main sticking point is now the cost of living.

Yet the cost of living is a global problem, largely caused by the invasion of Ukraine and the subsequent soaring price of fuel and foodstuffs.

No government can change this, which is why the cost of living is an  electoral problem everywhere in the world, from the UK to the USA, from Argentina to Poland.

The immediate remedy proposed by Azimio is to restore the cut of VAT on fuel to eight percent from 16 percent. This will only reduce the price of fuel by around Sh10 per litre. It won't solve much.

Government has scrapped virtually all subsidies, partly as part of the deal with the IMF and partly to repay the $2 billion Eurobond which falls due  next June.

Subsidies are a curse, they are addictive and dangerous. Governments cannot afford them but their electorates become dependent on them. Apart from free healthcare and eduction, goverments should avoid all giveaways. 

In fact, Kenya should raise the standard rate of  VAT to 18 percent in line with Uganda and Tanzania.

Quote of the day: "It may be necessary to use methods other than constitutional ones."

Robert Mugabe
The President of Zimbabwe resigned on November 21, 2017

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