Joseph Ndunda 13 September 2013 The government has today Friday, defended the implementation of controversial Value Added Tax (VAT) act 2013 which kicked off on September 2, leading to increase in prices of basic commodities amid public outcry. The government which came to power with promises of reducing the cost of living for majority poor says the new law which has elicited condemnation of epic proportions from civil society groups, is business friendly and broadens the tax base thereby making the tax system fair and productive. The new revenue law led to unprecedented upsurge of prices of domestic use commodities including bread, milk and maize floor among others. Printing costs also rose and caused a raised price of newspapers, school books and other published materials. Addressing a press conference today, Cabinet Secretary for National Treasury Henry Rotich has said the government embarked on and stands for the implementation status of the revenue law to address challenges experienced and reported by taxpayers including lack of clarity of the law and high cost refund backlog. Rotich said the complexity of the law occasioned by several amendments and increase of prices of tax exempt- items as well as challenges experienced by taxpayers for several years prompted the government to implement the new laws to cut down on exploitation of tax evasion loopholes. The tax skirting menace, according to Rotich, led to decline of revenue yield from VAT as a share of Gross Domestic Product (GDP, from 10% to 6% in last financial year. He blamed unscrupulous middle business men and distributors for the unlawful rise of basic commodities’ prices. “Between 2007 and 2012, the prices of zero-rated and exempt products such as maize and wheat floor, bread, milk, rice and kerosene increased by 50% despite no adjustments on VAT rate,” he said. He has now directed the Kenya Revenue Authority (KRA) to crack down on the middlemen who have taken advantage of the confusion to exploit Kenyans by unduly raising prices of tax-exempt goods. At the conference, Kenya Manufactures Association Chairman Polycarp said his organization fully supports the act which he said has off loaded them of annual tax burden of Kshs. 29 Billion caused by unexpected influxes by 18%, which has been now cast on the consumer. The KRA Commissioner General of John Njiraini said that tax compliance remains at 22% percent despites umerous attempts to widen it. He has announced that they have already arrested and taken to court several traders who are not registered for VAT compliance but are implement ting the law. He called on the Consumer Federation of Kenya (COFEK) to join them in taming the exploitative practice by the dishonest traders. The COFEK has written to the Constitutional Implementation Commission CIC to seek advisory on the constitutionality of the new VAT Act.
Posted on: Fri, 13 Sep 2013 10:25:04 +0000
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