Mudavadi wants VAT reduced to 12pc

September 8, 2013 10:14 am
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The UDF party leader said reducing VAT to 12pc will make prices affordable, retain savings, increase spending and improve tax collection/FILE
The UDF party leader said reducing VAT to 12pc will make prices affordable, retain savings, increase spending and improve tax collection/FILE
VIHIGA, Kenya, Sep 8 – Former Deputy Prime Minister Musalia Mudavadi has called for the amendment of the VAT Act from a high of 16pc to a manageable 12pc to cushion against spiralling prices of commodities and the cost of doing business.

The UDF party leader said reducing VAT to 12pc will make prices affordable, retain savings, increase spending and improve tax collection.

He accused Parliament as the culprit for not excising its oversight role on the VAT Act.

“Budgets are proposed by the Executive and Parliament approves. On VAT, MPs failed Kenyans. They failed to cross-examine the effects of the tax on Kenyans”, he said.

Mudavadi said the National Assembly should redeem itself when it reconvenes next week by amending the VAT Act to reduce the tax.

He said food and energy prices and cost of doing business have become too high and soon inflation will spiral because agricultural production will be too costly, investment savings and consumption will reduce.

“You will be pouring money down the drain with subsidised fertilizer when other farm inputs such a fuel and labour are unaffordable, and when people cannot afford investment savings and reduce spending”, he said.

Mudavadi who was finance minister during the worst downturn of Kenya’s economy in the early 1990s warned that the appetite for consumption tax will be counterproductive.

“VAT has distortion effect through multiple taxation. Bank transactions like dividends now attract a new 10pc charge even after withholding tax has been deducted. It is counterproductive on savings. We may unwittingly be introducing a cash economy when Kenyans avoid banking. People will keep money away from the economy”, Mudavadi said.

The Amani Coalition leader said it will be in the interest of collecting more tax if consumption tax was reduced and the base widened to net in more tax payers.

“It is good economics for more people to afford the tax than all of them who cannot afford it. KRA will soon have dry coffers as many cannot spend and others will seek tax avoidance”, he cautioned.

Mudavadi also took a snipe at the hypocrisy of leaders calling for Luhya unity when all they do is trade insults at public gatherings.

“What unites people is purpose not the tirade you throw at colleagues and other tribes. You must be honest and supportive knowing that we all need each other. Unity is not schemes to fail your brother,” he told a gathering at the homecoming of Hamisi MP Charles Gimose in Vihiga County on Saturday.

He told the audience including Cyrus Jirongo, former Speaker of National Assembly Kenneth Marende and MPs that he offered the community an opportunity to unite behind him as a presidential candidate and will still do so, but some leaders now calling for unity have constantly betrayed the community cause.

“I have no apologies for standing for the presidency. Some have made unity calls a fashion after absconding to guarantee unity in elections. They owe the community an apology”, he said.

Jirongo had intimated that he was the best bet for a Luhya presidency bid while berating other communities.

Former Kanduyi MP Alfred Khangati had asked for forgiveness for twice supporting Raila Odinga.

“I betrayed the community twice supporting Raila. Never again! I will now only support a Luhya”, he vowed.

Marende said he believed in Luhya unity because the constitution recognised tribes.

“As Speaker I kept repeating that Parliament was national not tribal. But now, the constitution recognises tribes, I now support the Luhya for presidency”, he said.

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