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Reflex Eco Group – Kenya News

By Joshua Masinde (Local journalist)

This Blog is sponsored by http://www.reflexecogroup.com

The government ruled out any further amendments to the new Value Added Tax law that has seen the prices of basic commodities increase by up to 16 per cent.

Treasury Cabinet Secretary Henry Rotich Wednesday said the new VAT Act 2013, which imposes a 16 per cent levy on commodities, will be implemented as it is and no more changes will be made to it, defying calls from consumers and industry lobbies to exempt some basic goods from the list.

The law took effect on Monday this week and has pushed up the prices of commodities like processed milk, newspapers and maize flour, dealing a major blow to consumers who are already confronted with high inflation rates.

“This is a one-off adjustment and we are not going to adjust the list any further,” Mr Rotich said.

According to the minister, the whole idea is to simplify administrative procedures that were causing the taxman a lot of challenges in terms of implementing tax collection.

“This new VAT Act will sort out all these administrative challenges and make it easier for KRA to work more efficiently on the issue of refunds,” Mr Rotich said.

The minister, however, warned businesses against pushing the entire cost to consumers.

With the new law, the number of items which had been zero rated will reduce from over 400 to only about 40, further boosting the revenue basket of the tax collector.

Last year, the revenue collector owed different firms nearly Sh25 billion in tax refunds for zero rated items, which had made it difficult for KRA to efficiently administer tax and pay refunds.

Under the previous regime of VAT, there was a lot of accumulation of VAT refunds at the KRA, which partly caused cash flow challenges to businesses.

The minister further said the government will review more tax laws, including excise and income tax laws, to ensure they are also easier to administer.

On Tuesday, Consumer Federation of Kenya said it would be seeking a court order to delay implementation of the new VAT Act 2013.

Some of the goods which have been affected by the new tax include mobile phones, books, charcoal and animal feeds.

Services like travel and tour operations, hotel and hospitality and railway transport have also been affected.

The consumer’s lobby group also warned that this would lead to a spike in inflation to double digit levels from 6.9 per cent currently, further pushing more Kenyans below the poverty line.

Tax experts have also faulted the government’s move to implement the new tax, saying it has pushed up the cost of living.