Third Eye

Shelve proposal to slap VAT on bread

Friday, May 21st, 2021 00:00 |
KRA headquarters. Photo/File

Pushing the cost of basic goods beyond the reach of the common man is counterproductive.

Unfortunately, some of the funds intended to be raised in the next budget fall under this category.

Take bread. For many years globally and not least in Africa, the cost of this household commodity has caused upheavals and the current steady surge in the cost of the breakfast staple is alarming.

While the trend partly has to do with the increasing cost of wheat globally, a proposal to hit the commodity with 16 per Value Added Tax (VAT) means that bread could soon be out of the reach of many consumers.

Since bread is considered among the cheapest and widely available food commodities and which keeps many families, workers and even students going, any tax that pushes it out of reach of the majority is not only unfortunate but also dangerous.

Informed by the Tax Laws (Amendment) Bill, 2020, many changes were considered, however, reduction of VAT zero rated products, including some basic necessities which moved from zero rate to exempt, stood out.

As the National Treasury plans to raid the breakfast budget, it means that manufacturers will not be in a position to deduct input tax incurred in the production of bread, and the extra cost will ultimately be passed on to consumers.

It is sad that this is coming at a time when the Covid-19 pandemic is ravaging the country, a period when the government is expected to cushion ordinary Kenyans from tax burden.

Indeed, as informed by the considered opinion of experts, increasing the cost of basic commodities is untimely and counterproductive.

Reports of a new tax on bread come shortly after the planned inclusion of excise duty and other charges in computing the taxable value of petroleum products that will see LPG charged VAT at the standard rate, another counterproductive move. Currently, VAT on LPG is zero-rated.

Going by the uproar by consumers during the previous monthly fuel price schedules when the cost was expected to increase but the government decided to foot the bill, this means that a long-term solution is long overdue.

More importantly, plans to subject LPG to VAT at the standard rate is likely to increase the cost of gas and, therefore, defeat government’s efforts to encourage uptake of clean energy.

To save the common man, the government must consider less punitive ways of making money. This must start with dealing with corruption.

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