The International Monetary Fund (IMF) is pushing the Government of Kenya to ensure that Kenyans are paying more for maize flour and cooking gas.
According to the IMF, Kenya’s National Treasury should increase the price of basic commodities by at least 16 percent if the economy wants to survive.
The Government of Kenya scrapped Value Added Tax (VAT) of 16 percent for such “sensitive” goods as bread, cooking gas, maize flour, and wheat flour, a move IMF says has led to “collection shortfalls.”
According to IMF, the Kenya Revenue Authority (KRA) is losing more than 478 billion shillings for failing to tax “sensitive goods” saying the amount is more than its tax deficit of 300 billion shillings.
In 2013, the Government of Kenya exempted 40 goods and 18 services from paying VAT but according to IMF, the number of goods exempted now stands at 104 and that of goods at 31.
“Publish an annual report on the impact of tax expenditures and their budgetary implications, highlighting the cost of new exemptions, waivers, reliefs, and allowances,” said IMF.
The proposal by the IMF comes after the World Bank, in its study, said that Kenya loses 1.8 percent of GDP on corporate income tax and 3.1 percent on VAT exemptions.
If the National Treasury will bow to the pressure from IMF, then the already emaciated Kenyans will have to dig deeper into their pockets to pay for basic commodities such as maize flour.
The Kenyan economy seems to be going through a rough economic time coupled with inadequate cashflows, unemployment and with investors leaving for other countries.
The year 2019, for instance, was characterized by mass layoffs by various companies. It is estimated that more than 25,000 people lost their jobs during 2019 as many companies could not manage to remain afloat.
The year 2020 has kicked off with several hotels either closing down or firing their employees as the cost of doing business continues to pile on them.