NAIROBI, Kenya, Mar 14 – A 16 percent value-added tax (VAT) on milk and bread is being considered by the Treasury as part of a new initiative to increase revenue collections from middle-class households.
Speaking during the 12th African Fiscal Forum, Treasury Cabinet Secretary Njuguna Ndung’u said that investigations have demonstrated that the existing system, which zero-rates milk and bread VATs, has not succeeded in providing a buffer for the targeted impoverished households.
He further noted that the two commodities are consumed by the middle class and not the poor.
“The total VAT collected in Kenya is close to about 40% of the total taxes, but 18% of it goes to refunds on products that are presumed to be consumed by the poor,” Ndung’u said.
“When you look at those products then you realize that 95% goes to bread and milk. Who goes to the supermarket to buy bread and milk? So, we are not actually compensating the poor, but the middle class,” he elaborated.
If the VAT is implemented, the price of milk and bread will increase slightly. Implementation of the new tax will, for example, see a 400-gram loaf of bread rise by about Sh9.
President William Ruto’s government aims to collect Sh2.95 trillion in taxes in the fiscal year 2024/25, relying on proposed extensive tax measures.
