MPs shoot down government attempts to raise VAT, excise duty on essential commodities

The Members of Parliaments (MPs) have refused to yield to the pressure by the National  Treasury to increase taxes on essential commodities in a bid to raise revenue for the Finance Bill 2022.

They have shot down attempts to raise value added tax and excise duty on food stuff and other basic commodities. they include wheat flour, beer and gaming  which would have seen Kenyans dig deeper into their pockets.

This comes against the backdrop of the impending general elections in August and the sitting MPs fear such a move would have political backlash in their bid to be seeking reelection.

In an interesting turn of events, the National Assembly’s Committee on Finance and Planning turned down Treasury attempts to increase taxes on betting and alcoholic beverages.

The Treasury was eyeing to get at least Sh51.6 billion from the new regulations.

“The committee noted that the amendment will increase the price of maize flour, cassava flour, wheat or muslin flour and maize flour containing cassava by more than 10 per cent in weight and recommends deletion of paragraph 28 (a) (ii),” reads the Committee’s.

After the committee’s role in the inclusion of Kenyan opinion of the Bill, it will be debated on the floor of the house.

“The increase of tax on basic commodities such as maize flour, cassava flour, among others was also opposed by most stakeholders because it will further increase the cost of living for the common mwananchi.”

“The proposal to increase excise duty on betting activities will encourage people to bet in offshore companies and thus not achieve the intended purpose. The government will also not be able to realise the expected revenue from the sector,” said the Committee in the report.

“The proposal to increase excise duty on alcohol may encourage uptake of illicit alcohol. The government may not therefore achieve the intended purpose of the tax, which is to discourage drinking, and will therefore not realise the expected revenue,” said the Committee.

The Bill had proposed increasing excise on beer by 10 per cent and spirits by 20 per cent.

However, the local beauty industry suffered the wrath of the Treasury by the introduction of a 15 per cent excise duty on cosmetics. Manufacturers had opposed the same, arguing that higher prices would result in an influx of fake products in the market.

“The committee adopts the proposal in the Bill that the excise duty be at 15 per cent to discourage fake and counterfeit products in the market.”

The digital service tax which Treasury wanted to increase to 3 per cent has been retained at 1.5 per cent.