Manufacturers oppose VAT on bread products

Maana Lifestyle Supermarket attendant arranges bread at Luanda town in Vihiga on April 11, 2020. [Benjamin Sakwa, Standard]

Bakers have criticised the government’s move to introduce value-added tax (VAT) on bread and its products.

The Bakers Association of Kenya (Bake) says the tax is inhumane, considering the economic downturn the sector has suffered since the start of the Covid-19 pandemic last year. It argues that introducing the tax will deny majority of Kenyans access to quality food.

“The introduction of 16 per cent VAT on this commodity will further increase the average price of a 400g loaf of bread by approximately Sh8, making it unaffordable to the majority of Kenyans,” said Bake in a letter to the National Treasury. “This will be in violation of the fundamental right to affordable food.” 

The planned tax comes a few months after manufacturers increased the price of bread by Sh5 following a jump in global wheat prices.

The price of bread has remained stable over the years due to zero-rating on tax, with manufacturers competing for the small margins buoyed by economies of scale.

The government, however, argues that it needs to find ways to support its 2021-2022 budget. Treasury has estimated that it will borrow about Sh1.5 trillion by July. 

However, most of the revenue-collection measures highlighted in the Finance Bill, 2021 are generally aimed at deepening the tax bracket rather than widening it.

The key targets are fuel, alcoholic drinks, betting, cigarettes and financial transactions, with bread and milk formula slapped with 16 per cent VAT.