Kuria Kimani, the Member of Parliament for Molo Constituency and chair of the National Assembly Finance Committee, has revealed that the national treasury proposed an increase in VAT on bread to protect the health of Kenyans.
While speaking during an interview with Citizen TV’s Sam Gituku, Kuria noted that the treasury took a note of an increase in diabetes among Kenyans.
According to the Finance Bill 2024, the National Treasury proposed a 16 per cent VAT on both unleavened and leavened bread which had earlier been exempted from taxation.
Moreover, if the bill is passed, bread will be subject to VAT at the proposed rate, causing the price of the standard 400-gram loaf to increase by at least Ksh10.
“We had a long conversation with the national treasury. The initial thinking was there was a concern about bread and Diabetes,” said Kuria.
Also Read: Kenyans Asked to Give Views on Proposals to Slap Taxes on Bread & M-Pesa
Kuria Kimani Explains Options on the Implementation of the VAT
Further, he said that the options treasury will consider were to implement the 16 percent VAT or go back to tax exempting both unleavened and leavened bread.
On the other hand, Kuria indicated that implementation of the VAT will mean that Kenyans will increase their purchasing rates of locally made bread.
According to the MP, locally made bread, some which he said were being sold by the roadside, would even lead to more diseases and health problems. Therefore, he asked Kenyans to submit their opinion on the bill to inform the decision the treasury will make.
“But the argument that we are receiving from Kenyans is that bread is not a luxury good, bread is something that people have every morning for breakfast,” added the MP.
Implementing VAT based on current retail prices of bread is projected to lead to an anticipated increase ranging from Ksh9 to Ksh21 for high-end brands. Consequently, the revised retail prices of bread could range from Ksh65 to Ksh150.
Also Read: Revealed: How KRA has Maintained Steady Tax Collection Despite Hard Times
Treasury Earlier Reason for Proposed Increase in VAT
According to Treasury cabinet Secretary Njuguna Ndung’u, the move would ensure tenfold returns and reduce financial constraints.
Speaking during a media interview in March, the CS said that increasing VAT on bread would be a way of broadening revenue incomes noting that the decision would come after understanding the market and the purchasing patterns of Kenyans.
“If every year you are raising the tax rates and not looking at how you actually broaden to bring in more products, things become a little bit more uncomfortable,” said Ndung’u.
For instance, he said that although bread and milk get 95 percent of tax returns because they were considered to be consumed by the poor, they were actually a middle-class meal.
“The total VAT collected in Kenya comprises of about 40 percent of the total tax, 18 percent of it goes to tax refunds on items that are considered to be consumed by the poor.
“But when you look at it, you realize that 95 percent goes to bread and milk. Then the next question is that who goes to the supermarket to buy bread and milk? So, we were not compensating the poor, we were compensating the middle class,’ he explained.
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