MP in push to amend Act to stop levying VAT on essential items

By Alphonce Shiundu

An MP now wants to petition the Speaker of the National Assembly Justin Muturi to allow an amendment to the controversial Value-Added Tax Act to stop the levying of tax on processed milk, newspapers, textbooks and animal feeds.

Speaking to The Standard yesterday, John Mbadi (Suba) said it was crucial for the changes to be made in law to ensure socio-political stability.

The MP, who was in the National Assembly when it approved the Bill prior to it becoming an Act, said the government and the lawmakers had underestimated the impact of the law when they legislated on it. As soon as it took effect on September 2, the MPs have been under public pressure to amend the law.

“It is true that there are unscrupulous businessmen who are taking advantage, but the government should have anticipated such machinations, because, our markets are not perfect. Now, it is the poor people who are suffering, paying more for goods that were not included (in the VAT Act),” said Mbadi.

The law was steamrolled through the House on the last day just before the recess, with the government itself amending it to exempt essential items such as unprocessed milk, sanitary towels and pads, maize, rice and maize flour from the tax.

But the National Treasury reinstated the tax on an estimated 400 items that had been exempted, with the aim of raising an extra Sh10 billion in revenue. There has been a public uproar about the tax, which has also forced the House Committee on Finance, Planning and Trade to seek audience with the taxman with a view to reviewing the taxes.

Yesterday, Mbadi told The Standard: “If they exempt all the essential items, they are likely to lose between Sh3 billion and Sh4 billion. That’s a drop in the ocean given that we have a budget of Sh1.6 trillion”.

The challenge for the National Treasury is raising the money to fund increased spending thanks to the new devolved system. Every shilling counts, and that’s the reason they  reviewed the VAT law to make sure that they collect as much as possible to ensure the country continues to run.

But Mbadi said the new law was hurting the poor.

“The economic and political instability, plus the social upheaval that is likely to come as a result of the new VAT law is so huge. The opportunity cost is so great. Why should we threaten the whole economy because of less than Sh5 billion?” posed Mbadi.

The MP, from the opposition Coalition for Reform and Democracy, said he was doing an audit of the impact of VAT to identify all essential goods that had been brought back under the VAT umbrella, before filing the amendment.