The National Treasury is proposing to slap 16 per cent value added tax on milk and bread.
The new tax will be the latest in a series of punitive taxes that the current administration has slapped Kenyans with, and might mean that millions of households may no longer be able to afford breakfast. Up until now, milk and bread have been zero-rated.
This may no longer be the case in the coming months if the National Treasury gets its way. Already, the National Treasury Cabinet Secretary Professor Njuguna Ndung’u has started making a case for the return if tax on milk and bread.
“When we started doing some simulation work, we realized that we can actually gain a lot. Once you have high tax rates, the political remedy is often to try and create a rebate or should I say create refunds for some of the institutions dealing with products that are related and being considered to be consumed by the poor,” said Professor Ndung’u.
Professor Ndung’u added that total VAT collected in Kenya comprises of about 40 per cent of the total taxes. However, he said, about 18 per cent of it goes to tax refunds for products assumed to be consumed by the poor.
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“When you look at those products, you realize 95 per cent of refunds go to bread and milk. Who goes to the supermarket to buy bread and milk? We are not compensating the poor, we are compensating the middle class,” said Prof Ndung’u during the Africa Fiscal Monitor session organized by the International Monetary Fund (IMF).
It is estimated that if the proposed plans by the National Treasury are passed into law, the cost of a loaf of bread that weighs 400 grams will increase by at least Sh. 9.
