The cost of basic food items is expected to rise significantly from July after the government announced a new plan to enact sweeping changes to taxation laws.
A uniform rate of 16 percent will be slapped on all items including basic commodities such as milk and flour which have traditionally been exempt.
A loaf of bread currently selling at Sh50 could, therefore, cost Sh58 if the National Assembly approves the proposal.
“We are looking at exemptions on several products that are widely consumed, but not on VAT such as milk, sugar, maize flour, wheat flour,” disclosed Benson Korongo who is a commissioner with the Kenya Revenue Authority (KRA).
Low-income families will be affected the most by the plan which the government hopes will help them raise at least Sh1.75 Trillion for the next financial year.
The KRA target is 17 percent more than the Sh1.5 Trillion for the period ended June 30.
Furthermore, plans are underway to double the tax on dividends earned by 3.6 million Kenyans who are members of cooperative societies.
Fears have been raised that the changes will hamper the savings culture popular among many Kenyans who are members of saccos and other organized groups.
Lobby groups such as the Consumers Federation of Kenya (COFEK) have already argued against the amendments which Cabinet Secretary Henry Rotich is expected to highlight in his budget speech.
“Applying VAT on all zero rates and exempt items will mean a steep escalation in the cost of living. This will, in turn, shrink consumer spending,” revealed Stephen Mutoro who is COFEK Secretary-General.