Farmers reject VAT on inputs and food

July 10, 2012
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Through the Kenya Private Sector Alliance (KEPSA), they said putting VAT on the farm inputs will translate to higher cost of production, hence higher food prices/COURTESY

, NAIROBI, Kenya, Jul 10 – Stakeholders in the agricultural sector have opposed the Value Added Tax Bill 2012 which has provisions to introduce VAT on some agricultural inputs and food items.

Through the Kenya Private Sector Alliance (KEPSA), they said putting VAT on the farm inputs will translate to higher cost of production, hence higher food prices.

KEPSA Agricultural Board Chairman Nduati Kariuki said this will continue to discourage farmers who are already suffering from the high cost of farm input and who have been urging for subsidies.

“The removal of fertilizer from the list of zero rated goods, will lead to the increase of fertilizer prices. This will translate to increase in cost of production, beyond the means of largely poor rural, small hold farmers,” said Kariuki.

Some of the excluded food Items in the VAT exemptions in the Bill include maize and wheat which, he said may, lead to an increase in the price of these commodities.

Speaking at a press conference, Kariuki added that the removal of milk and cream from the list of zero rated goods is disincentive to milk processing companies.

He also complained that the Bill has also proposed that locally produced and ginned cotton join the VAT list, which he said will be contrary to the current efforts aimed at revitalising the sector to improve the income of cotton farmers.

“It will make the already perilous food security worse by pushing food prices even higher. The majority of Kenya’s population cannot afford any further in food prices,” he added

At the same time Cereal Growers Association Chairman David Nyameino called on the MPs to reject the Bill once it gets to the floor of the House until the clause to tax the items is removed.

He claimed that the finance minister wants the amendments to be made in the Bill at the expense of farmers.

“We have a strange cassava disease; we also have strange maize and now a strange finance bill of VAT. There is nowhere in the world where farmers are penalised to produce. Maybe this is meant to make Kenyans be total consumers and not producers,” said Nyameino.

The Bill has made changes with regards to the current provisions of VAT Act cap 476.

Schedule 2 on the list of zero –rated goods, compared to fifth schedule of the current law shows that a large of zero-rated goods will be standard rated (attract VAT of 16 percent) if the Bill is passed as it is.

“The overall effect will be push down the economic performance of the country to adverse social effects,” said Dr. Ceaser Mwangi KEPSA agricultural Board Vice chair

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