Consumer lobby opposes move to reintroduce VAT Bill

Consumers Federation of Kenya (Cofek) secretary general Stephen Mutoro (right) confers with vice chairman John Juma (left) during a press briefing at the Panafric Hotel June 12, 2013. Cofek has opposed the re-introduction of a Bill by Parliament whose enactment will see the cost of bread, maize flour and other basic commodities increase by 16 per cent. DIANA NGILA 

By LUCAS BARASA lbarassa@ke.nationmedia.com
Posted  Wednesday, June 12  2013 at  13:50

IN SUMMARY

• VAT Bill proposes to slap a 16 per cent tax on basic commodities that are hitherto untaxed such as sanitary towels, , rice, wheat flour, bread, wheat, and processed milk.
• Cofek plans to petition the International Monetary Fund President, United Nations Special Rapporteur on the Right to Food, President Kenyatta and Treasury to protest plans to reintroduce the Bill.

Consumers have opposed the re-introduction of a Bill by Parliament whose enactment will see the cost of bread, maize flour and other basic commodities increase by 16 per cent.

The Consumers Federation of Kenya (Cofek) said the controversial bill which proposes 16 per cent Value-Added Tax on the commodities would not only make life unaffordable to majority of Kenyans but would kill the economy, increase insecurity and diseases.

“The government will be faced with almost instant realities of low food production and mass food imports which will deny the country a lot of revenue as well as strangle agriculture related industries that rely on locally produced raw materials,” Cofek secretary general Stephen Mutoro said Wednesday.

Mr Mutoro, who was accompanied vice-chairman John Juma told journalists at Panafric Hotel, Nairobi that Cofek would lead consumers in camping at the Treasury or at State House if it is barred from presenting petitions to Cabinet Secretary Henry Rotich and President Kenyatta.

“We will seek the support of all Kenyans to camp at Rotich’s office or at State House gate as they cannot eat while the poor continue to die. There will be no country called Kenya if the bill is passed at whatever form. We will ask Kenyans to come to the Treasury forever and eat from the Treasury,” Mr Mutoro said.

Cofek further plans to write to the International Monetary Fund President, United Nations Special Rapporteur on the Right to Food, President Kenyatta and Mr Rotich to protest plans to reintroduce the Bill.

“We will seek judicial intervention if the Bill is approved and assented to by the President,” Mr Mutoro said.

Last week, Mr Rotich told Budget and Appropriations Committee that the Bill is a priority for the National Treasury if only to ensure that the taxman meets his revenue targets.

Mr Rotich said there were revenue leaks in the current VAT Act that need to be closed.

The VAT Bill proposes to slap a 16 per cent tax on basic commodities that are hitherto untaxed such as sanitary towels, newspapers, journals and periodicals, rice, wheat flour, bread, wheat, computers and computer software and processed milk.

Domestic electricity consumption, water drilling services, and landing and parking services for aircraft also stand to be taxed.

But Cofek said it is lobbying MPs led by ODM’s John Mbadi to reject the Bill saying it is unconstitutional.

"It negates Article 10 provisions on stakeholder participation and is an affront on the economic and social rights and in particular Article 43 (1) which states that every person has a right to be free from hunger and to have adequate food of acceptable quality."

Taxing basic commodities is a sure way to increase revenue collections for the taxman, but it portends economic burden for the public.

The inflation for the first half of the current financial year was recorded at 5 per cent, and if the taxman is to be believed, an increase in the inflation rate by just one percentage point means that the taxman will net Sh7.7 billion more for the public coffers.

On Wednesday, Cofek accused the Jubilee Government of contradicting the Constitution by being pushed by the International Monetary Fund to pass and enact the Bill to win some favours. The Bill, Mr Mutoro said, was to be brought to Parliament during former Finance Minister Robin Githae’s tenure but rescheduled as the government then lacked numbers to pass it.

If passed and implemented, the Cofek officials said, they feared unscrupulous traders will increase prices of the affected commodity by more than 16 per cent.

“Farming will be affected as it will be cheaper to import some produce than grow locally,” Mr Mutoro said

aying increasing taxation requires sufficient justification, Cofek said the government should focus on attracting direct foreign investments, reform Kenya Revenue Authority, introduce capital gains tax, strengthen Ethics and Anti-Corruption Commission and devolve it to Counties and put in place austerity measures to cut costs.

“Unregulated expenditures on legal fees by government agencies hiring private lawyers point to the systemic incompetence and low capacity of the Attorney General,” Cofek said.

The body also took issue with expensive foreign travels by top government officials, the Sh300 million requested by Judiciary for the purchase of a plane, continued financing of non-viable foreign embassies and investments in non-core government services.

It said lowering VAT will generate growth and employment,  zero-rating food would give immediate poverty relief and that even developed countries have VAT exemptions targeting the poor.

"Tax harmonisation and reform measures need to enable the economy not to rely on imports but exports,” Mr Mutoro said.

Additional reporting by Alugo Stacy and Winnie Adhiambo