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Sep 05, 2018

VAT ACT 2013: the big wakeup call

True to our Kenyan Spirit we are now on a new wave after we had a new darling in “Sany” the demolishing king. A few weeks ago, our focus and energy was on demolishing illegal structures sitting on riparian land that we even had the word riparian as a highly searched name in the interwebs, because we did not even know what it meant.  

Now we are on another issue that will touch on all of us and on this one we all need to get interested. The fuel prices have gone up! We are now all “united” on the very touchy issue but truth be told the middle class Kenyan who would be best placed to help in this war against the implementation of the taxes really does not care. 

Reason being all they have seen is an increase in the cost of fuel which to them is an extra two thousand shillings a month and they can keep their cars on the road. Let me break this down for us and let you know that you are about to start asking for a pay raise because suddenly all your costs will go up. 

In Kenya most of the production is highly dependent on petrol as we are yet to embrace electricity running our machinery full time. Beyond that, transportation is one of the most fundamental components of basic commodities we have in the market. Let me take a product I believe at least more than half of the population uses daily. 

When you look at the brookside milk on the shelves of our supermarkets one things should be very clear to you, there are no cows in Nairobi and therefore this milk has been sourced from every possible corner in this country. From the farmer, the transport cost of the milk kicks in, from the corporative coolers to the Brookside plant another component of transport kicks in. Brookside at this point has two options to pass this cost to the farmer by reducing the amount of money they pay for a litre of milk or increase the cost of milk to the consumer. The most likely is the latter, as this is the person they have no contract with. The farmer has already created a relationship with brookside and this is an important relationship to protect.  

This is just an example of a value chain ripple effect which is what will happen in the maize, sugar and all other sectors. So dear Kenyans, as we ignore the Kenya Motorists Association, brace yourself for inflation you did not see this coming. This is the rise in the cost of living that your annual inflation adjustment will not be able to cover.

What the implementation of the tax has however taught me is our ignorance of the policy space. We have left this to who we casually call “policy” makers and only wake up wishing some civil society group will walk to the court and block the implementation. Question is what about when the policy was being developed? Why don’t we take part when we are called upon to get involved in the policy and legislation development process? If we are to learn then this should be a turning point for us to be more involved in policy development in the country. The VAT Act 2013, has been suspended once and its implementation delayed, which means we do not need another suspension, we need a long term solution to the economic crisis that we are in.  We are a country that has sunk deep in debt. You cannot tax your way out of economic debt. It will get worse and we will borrow more as the economy dives into hyper inflation. 

This  is a wakeup call for us to be involved in the development agenda of the country especially on the policy that shapes economic development in the country. Otherwise we need to brace ourselves for tougher economic times as the fuel prices sky rocket. As we speak, we already have a fuel crisis in Nairobi, there is none at the pump.

By Sarah Makena

Picture courtesy: Johannes Rapprich

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