MPs condemn ‘aggressive’ VAT Bill

July 30, 2012
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Dujis MP Aden Duale (file photo) said the aggressive tax law will only increase the cost of living and inflation for ordinary Kenyans who are recouping from the harsh economic conditions experienced late last year.

, NAIROBI, Kenya, July 30 – Members of Parliament are calling for the withdrawal of the Valued Added Tax (VAT) Bill 2012, arguing that it will negatively impact the poor should all basics foodstuff and unprocessed foodstuff attract a 16 percent tax.

Dujis MP Aden Duale said the aggressive tax law will only increase the cost of living and inflation for ordinary Kenyans who are recouping from the harsh economic conditions experienced late last year.

“If this comes in to law there will be food riots in this country. If this law is implemented the economic growth rate of the country will go down; we will be in a worse situation with the food deficit,” he said

The VAT Bill seeks to remove basic food stuffs such as maize, milk, bread and wheat from their current exempt status to be taxed at 16 percent.

Other taxable items in the new Bill include pharmaceutical products, farm inputs, textbooks, newspapers, mosquito nets and fishing nets.

“Government should not bother bringing this Bill to the House. If government puts it in the order paper, as Parliament we will lobby until it is withdrawn,” Yatta MP Charles Kiolonzo warned.

The Yatta legislator added that if the Cabinet fails to review the Bill, the MPs are prepared to bring censure motions against the Planning and Finance Ministries.

VAT remissions on Capital Investments, Schools, Universities, hotels and low cost housing have been scrapped from the Bill.

“We have credible information that the Minister for Finance has been put under pressure by the IMF (International Monetary Fund) and the World Bank to remove VAT on the products,” Duale claimed.

Though the VAT Bill is one piece of legislation that the government hopes will enable it to increase tax collection, some experts have challenged it saying it will only erode the economic gains made in the last few years.

“The VAT Bill is a very retrogressive tax law, because it is essentially going to tax poverty and hurt a lot of economic sectors. It is going to, for the first time, impose VAT on fertilizer, pesticides and inputs needed in agricultural production,” PKF Eastern Africa Regional Director for Tax Martin Kisuu said in an earlier interview with Capital FM News.

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