VAT law to coagulate dairy sector

September 3, 2013
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Kenya Dairy Board Managing Director Machira Gichogi said the 16 percent VAT on milk may lead to government losing more revenue instead of gaining, as more Kenyans turn to unprocessed milk/FILE
Kenya Dairy Board Managing Director Machira Gichogi said the 16 percent VAT on milk may lead to government losing more revenue instead of gaining, as more Kenyans turn to unprocessed milk/FILE
NAIROBI, Kenya, Sep 3 – The Kenya Dairy Board has expressed fears of increased milk hawking in the near future following the introduction of the new VAT law.

Kenya Dairy Board Managing Director Machira Gichogi said the 16 percent VAT on milk may lead to government losing more revenue instead of gaining, as more Kenyans turn to unprocessed milk.

Speaking after a meeting with the dairy farmers in Nairobi on Tuesday, Gichohi said the dairy farmers are now planning to meet with the Parliamentary Committee on Agriculture to discuss the possibilities of amending the law and remove the tax on milk.

“The processed milk now is going to become too expensive compared to many countries in the world, even our neighbours. When the processed milk becomes very expensive, the effect to the consumers is that they will tend to go the other way round. So it is something that needs to be re-looked again,” Gichohi told journalists.

With many Kenyans embracing the consumption of processed milk, deliveries by farmers to processors have grown to around 500 million kilograms in 2012, a number which he says will significantly drop as Kenyans turn to unprocessed milk.

“Hawking of raw milk is a public health hazard due to the poor and unhygienic handling practices that may predispose the milk to contamination and disease causing micro-organism,” Small Scale Dairy Farmers Association Chair, Lydia Kagema said.

“Hawking of milk is associated with adulteration of milk with water and use of hazardous chemical that pose a health hazard to customers,” she added.

The dairy farmers have also expressed fears of disorganization in the dairy industry especially by encroaching on the catchment of dairy cooperatives and other farmer groups.

“Hawking creates unfair competition in the dairy industry and denies government revenue,” Kagema said.

The Chairman of the National Dairy Producers Muhika Mutahi said the farmers will lobby for the gazettement of the draft dairy regulations for the better management of the dairy industry going forward.

Following the VAT law, a 500ml packet of milk goes up from Sh45 to over Sh60 starting this September.

Other affected commodities include milk, fertilizer, cooking gas, text books and cost of electricity among other retail products.

Treasury hopes to raise Sh10 billion through the revision of the VAT Act.

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