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Government and Policy

Why President Uhuru Kenyatta’s Memo Is More Expensive Than The 16% VAT on Fuel

BY Soko Directory Team · September 19, 2018 05:09 am

I have listened to some gullible Kenyans “thanking” President Uhuru Kenyatta for being old and “cutting” the 16 percent Value Added Tax (VAT) on petroleum products to 8 percent.

What many of these gullible Kenyans don’t know is that President Uhuru Kenyatta did not “reduce” anything, if anything, he just made it more difficult for thousands of households in Kenya.

The truth of the matter is, there is no VAT that has been reduced. What the President did actually was to raise taxes on petroleum products from zero percent to eight percent.

I should, however, acknowledge that the 16 percent VAT on petroleum products has been in existence since 2013. It was given a grace period of three years and was supposed to come into effect in 2016. It was then suspended for two more years to the 1st of September 2018.

Members of Parliament, in an effort to show that they are “for the people” rushed to vote for the amendment of the Finance Bill 2018 to further suspend the implementation of the 16 percent VAT for two more years to 1st of September 2020.

The amendment was presented to the President for either signing or rejection with recommendations. The President rejected the amendments and instead explained in a memo as to why he rejected it and what he thinks should work for Kenyans.

His rejection of the amendment and the proposal to have the 16 percent come down by half to 8 percent gave him praises from some quarters with some calling him #TheBoldPresident.

What Kenyans seem not to have realized, Members of Parliament included, the MEMO that President sent to parliament makes life more difficult than it would have been if the 16 percent VAT would have been allowed to go through.

President Uhuru Kenyatta’s memo proposes a mandatory deduction of 1.5 percent from all salaried employees. The money deducted is set to be used to support the BIG 4 AGENDA on affordable housing. This means people will be paying for the houses that they will never live in and will most probably be taken over by the rich.

I don’t see how someone’s life will change after his/her salary is deducted to help in the construction of ‘affordable’ houses. Who will be given the houses? Which criteria will be used to award the houses? How sure are we that the project will kick off in the first place?

The president has also proposed the increase in excise duty fees on mobile money transfers. According to the President, the duty fees should be increased from 10 percent to 20 percent. This means Kenyans will have to pay more for sending and receiving cash via mobile phones.

When the authorities in Uganda implemented the social media tax where Ugandans are required to pay before accessing social media, we pitied and laughed at them and little did we know that President Uhuru Kenyatta was keenly taking notes and coming for us. In the President’s memo, there should be 15 percent excise duty on telephone and internet data services.

What the above means is that Kenyans will now have to pay more to make calls and browse. With an internet penetration at 112 percent according to data from CA and with the mobile penetration at more than 90 percent, the Head of State seems to have really done the math and seen a ‘big harvest.’

There is also a proposed 12 percent excise duty fees on money transfer services by banks, money transfer agencies, and all other financial providers. If this sails through, the amount charged to withdraw cash from the bank will go up.

The President also wants 20 percent excise duty to be charged on motor vehicles. There is also a 30 percent fees that he says should be charged on motor vehicles of tariff number 8703.24.90 and 8703.33.90.

The Bold President has also proposed 20 percent tax on sugar confectionery together with select white chocolate, chocolate blogs and slaps.

If the memo sails through, which will happen from the look of things, kerosene users will feel the hit. The president wants the price of kerosene to go up by 18 shillings in an effort to ‘curb fuel adulteration’. More than 60 percent of households in Kenya use kerosene for both heating and lighting.

Betting firms should be smiling after the President reduced the tax on winnings from 35 percent to 15 percent. However, individual winners in a bet will have to part with 20 percent of their prize as a tax. With millions of Kenyans now gambling to survive, the government is set to make a huge killing here.

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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