Cofek Vice Chairman John Juma (left) and Secretary General Stephen Mutoro (right)
NATION: By Stephen Mutoro
Treasury Secretary Henry Rotich’s first contact with consumers will be a hostile reception should he introduce an additional 16 per cent tax on basic consumer goods such as milk, bread, sugar, unga (maize flour), among others.
This is markedly the most unusual proposal in the not-so-new annual ritual of budget-making; a ritual that hardly strikes “Wanjiku’s” attention as much as this one has.
The development is causing a silent but large-scale unease and resentment towards MPs and the government. Once it explodes, this is one issue that will surely attract the attention of UN special rapporteur on rights to food.
In his 2013/14 financial budget estimate highlights read last Thursday, Mr Rotich made no secret that he is determined, against a massive consumer opposition, to re-introduce the controversial Value Added Tax (VAT) Bill whose real content remains scanty but whose certain adverse effect on consumer goods will be a minimum 16 per cent more on pricing.
The extra burden on the consumer comes at a time the cost of fuel and rent are set to go up, thanks to other parallel tax measures announced by the National Treasury boss.
Taxing food is seen as the last straw of humiliation and extreme pain for consumers who are already enduring a steep rise in the cost of living, low per capita income, biting unemployment and insecurity.
With Kenya’s history of unscrupulous middlemen and other cartels in the private sector, the consumer’s tribulations go beyond the VAT value. Why? Service providers and manufacturers are most likely to have the consumer shoulder multiple costs of the VAT applied from the additional production and especially for farm-to-market transport costs not to forget the high margins.
Perhaps it is the fear of the additional prices on consumer goods and services that worries the consumer most and for which the Treasury will have little to do in rescuing the hapless consumer who remains at the mercy of everyone, including their own government.
The net effect will be that food security will be compromised and worse still, raw materials for agri-based industries will be hard hit with additional costs to be passed to the consumers. For all the trouble, Mr Rotich expects to raise Sh10 billion from removing VAT exemption on foodstuffs and other essential consumer goods.
The tax measure has eluded two former Finance ministers and it appears that it will take a non-political National Treasury technocrat to take off.
But this unique and largely unpopular tax measure could be a double-edged sword for the young Jubilee government which would rather buy Class One pupils laptops at Sh17 billion, Sh7 billion more than what they would net from the VAT move.
This is not to say that laptops are not important. The questions in the minds of many Kenyans are many – What is really basic? Is it access to food or laptops? Would a child still use and keep a laptop after going without a meal? Is the government truly committed to lowering the cost of living?
The other pain with the proposed VAT Bill is that it is not only politically insensitive but has everything to do with the behind-the-scenes Treasury and Central Bank pacts with the International Monetary Fund (IMF).
This is evident in many correspondences between Kenya and the IMF, the last of which was made a grants-and-loans conditionality on March 28, 2013. On April 1, 2013, the IMF posted on its website the expectation of Kenya to pass the VAT Bill – whose passage was frustrated, for good reasons, by the Tenth Parliament.
As a former Finance minister who was dealing with the matter at one point, it’s unlikely President Uhuru Kenyatta would hesitate to append his signature on the VAT Bill once passed by Parliament. But that would come with a consumer backlash.
If that comes to pass, there would be various challenges to the position. The Consumers Federation of Kenya, for instance, is set to work with like-minded partners to mount various lawful measures to resist its implementation.
Kenyans will be watching to see which form the Finance Bill 2013 will take once ready for tabling. They will be watching every step and particularly the lips of former clergyman and Budget Committee Chairman Rev Mutava Musyimi’s wordings around the contentious Bill which has been hidden in the omnibus legislation.
Consumers will also be watching to see if the VAT Bill will be amended or left out completely. Until the standoff on the VAT Bill is addressed, the National Assembly and the Treasury will no longer be at ease with the Kenyan consumer.