Kenyans expected to witness a rise in the prices of bread and milk as the National Treasury is considering introducing a 16% VAT on the products in a fresh push to boost revenue collection.
Treasury CS Njuguna Ndung’u argues that studies by Government agencies have shown that the current structure where VAT on bread and milk is zero-rated has failed to cushion targeted poor households but instead benefitted the middle class who have relatively high income.
According to the Treasury, total VAT collected in Kenya comprises about 40% of the total taxes but 18% of it goes to tax refunds for products assumed to be consumed by the poor, with 95% of refunds going to bread and milk.
This means compensation isn’t for the poor but for the middle class. If this happens, Kenyans will witness a rise in the cost of the products.
PS: Zero-rated goods are products considered necessary such as food items, sanitary products, animal feeds, among others, and are exempted from VAT. Zero rating the items makes them more affordable for the consumers.
