Politicians have a penchant for speaking from both sides of their mouth. And as National Assembly Majority Leader, Aden Duale put it in a recent interview with the local media; our MPs are being hypocritical over their sudden rage over the implementation of the 16% VAT on basic commodities.
To begin with, the Finance Bill, 2013 that was signed into law by President Uhuru in 2013 amended a number of laws relating to various taxes and duties among them being the Value Added Tax (VAT) Act that has been the center of the storm the last few days. Although the VAT on petroleum is attracting more attention, other goods also affected include: fertilizers, textbooks, milk, newspapers among other products.
These amendments that introduced 16% VAT on products that were previously exempted from consumption tax was as a result of the government’s ceding ground to the International Monetary Fund (IMF) demands. The reason for this demand by IMF was to reduce the fiscal imbalance; that is, the government’s future debt obligations at the time were projected to be different from its future sources of revenue.
Our Members of Parliament rather than scrutinize the Finance Act, 2013 and its implications on the expected implementation of the VAT Act and conclusively debate the matter, chose to suspend its operationalization until 2016. And when the 2016 implementation deadline approached, MPs once again suspended that implementation of the 16% VAT on petroleum products for two years; meaning the Act would come into effect on September 2018.
Consequently, as the 2018 deadline approached, the MPs, once again, through the Finance Bill, 2018 unanimously voted to postpone its implementation for another two years. Only this time, Treasury has gone ahead to implement the Act and hence the sudden outcry. And while we are having MPs shouting themselves hoarse over the Executive’s decision to overlook their recommendations on the matter, it’s not lost on Kenyans that they had sufficient time – 5years to be precise – to deal accordingly with the matter but chose to play party politics instead.
When defending the changes in the VAT Act, the Deputy President, William Ruto indicated that it was necessary for generating revenue for the nation’s development agenda. Indeed since the start of President Uhuru and his Deputy Ruto’s government in 2013, they’ve carried out multi-billion projects that have seen an increased borrowing by the government to satisfy these projects; despite the constant warning by IMF that the continued appetite for borrowing was going to be unmanageable.