The Treasury has proposed having personalised tax returns on Value Added Tax (VAT) imposed on goods such as bread and milk.
In an interview with journalists, the Treasury CS Njuguna Ndung’u noted that the government is considering issuing tax returns for the two commodities based on receipts from customers.
This will be a shift from the current model where the government has issued the VAT returns on the commodities to the manufacturers.
“In this age and technology, we can decide that we are not going to have tax refunds we are going to have personalised tax refunds in your receipt when you buy things from the supermarket and we can say that you have bought bread and milk, we are going to compensate you directly not through the firm, “explained Njuguna Ndung’u.
Further, the CS mulled the possibility of the goods having VAT added to them as he noted that they are mainly purchased in supermarkets by the Kenyan Middle Class.
He elaborated that the VAT exemption on the two products is expected to cushion the poor but according to the treasury’s assessment, most of the goods are purchased by the middle class in the supermarkets.
“The total VAT collected in Kenya is about 40 per cent of the total but 18 percent of it goes to refunds on products assumed to be consumed by the poor”.
“But when you look at those products, you realise 95 percent goes to bread and milk and then we questioned who goes to the supermarket to buy bread and milk?” “We realised we were not compensating the poor we were compensating the middle class,” stated the CS.
According to the CS, this would serve to increase the revenues collected by the government seeing that the current taxation system has people evading tax and narrowing the tax base.
The CS explained that they realised higher taxes go hand in hand with a shrinking tax base as there is an incentive for people to seek ways in which they can evade tax.
This comes shortly after the government has proposed increased taxes on sugar products in a measure to tame obesity in the country.
Within the Medium Term Revenue Strategy, the budget aims to review taxation policies on sugar-based non-alcoholic beverages, including soda and juice.
