The controversial Value Added Tax (VAT) bill being amended will hurt farmers most as the Government still holds on its decision to tax farm inputs that mostly influence the pricing of farm products and the economic growth of the country.
Although Finance Minister Robinson Githae bowed to massive pressure from the public and chose to withdraw many of the controversial changes that would have put an undue burden on the poorest households and jeopardized food security, he has not withdrawn the 16 percent to be taxed on farm inputs such as fertilizers and pesticides.
By introducing the Bill, the Government had proposed that basic commodities such as maize and wheat flour, milk and cream, sanitary pads, fertilizer and other basic goods were to be taxed at 16 percent. This was however highly opposed by Kenyans who previously could buy these goods without paying taxes on them.
According to East Africa Tax and Governance Network, the implementation of the Bill in its current state will affect all Kenyans especially the poor who spend most of their hard earned income to purchase food stuff.
The network further stated that taxing farm inputs would definitely push the cost of living to unbearable levels hence hurt the current economic growth since inflation rates in the country will hike.
The controversial Bill is counterproductive to farmers seeking to improve their farming as the will incur extra cost in purchasing farm implements, and agricultural machinery. This will create a huge impact to the economy as 60 percent of Kenyans relay on agriculture.
All of these basic food stuffs have previously been zero-rated, meaning that no VAT had to be paid on them. If the VAT Bill is passed in its current form they will all be subject to 16 percent VAT, a cost that will most likely to be passed directly to the consumer. This will be a nuisance for middle- and high-income families, but will be catastrophic for low-income families which are already struggling to meet basic nutritional requirements.
Apart from basic food stuffs the Bill will also see increases in VAT on sensitive areas such as on electricity, kerosene, fertilizers, mosquito nets and for the disabled, blind and people living with physical handicaps. Taken together it seems that the VAT Draft Bill is insensitive to the needs of the poor and marginalized.
Value Added Tax (VAT) is a tax on consumption applied to the sale of goods and services at every stage of the production and distribution. This means that VAT is not only levied when the good or service is sold to the consumer; it is also levied when a business buys an input that goes into the production of the final good or service.