VAT BILL: TAXING THE POOR TO FEED THE RICH

I have a new found fond for black coffee and tea. Just before the VAT bill came in to operation, I told the office tea lady to be serving me black coffee or tea. Don’t get me wrong, I had no knowledge that the milk prices would soar as a result of the VAT levied on essential commodities. However, the pertinent question that lingers on many minds is the effect the VAT bill will have on the common Mwananchi. The effects have already been felt far and wide in just the first week.

Levying VAT on essential commodities is never a good idea. It has various repercussions both for the micro and macro economics of any country. The chain reaction created by increased food prices moves up and affects every other facet of human existence. In any case without food we would all die. So food is the base here. You should not be surprised when your route matatu charges above normal rates or your shoe shiner tells you to pay more because “bei ya maziwa imepanda”. Don’t ask whether the damn car runs on milk and don’t look at the shoes to confirm that he has not applied milk cream on the shoes. Their reasoning is simple; they have bills to pay and milk is one of them. They have to earn more to continue paying for their needs.

The government has many avenues for raising additional revenue but why it resorted to taxing the most poor and vulnerable among its citizens is what I can’t fathom. Statistics show that 60% of Kenyans live below a dollar a day and this is the price of one packet of milk today. So 60% of Kenyans can afford only a packet of milk or none at all. No one is making noise about the 10% excise duty the government has started levying on all bank transactions because most people with bank accounts don’t feel it. The accounts are most probably fat enough to withstand those small deductions. The Railway development levy’s impact is also minimal and greatly justified if after all it would lead to this country having a proper railway transport.

Another potential cash cow for the government is tax on capital gains. The Nairobi bourse is one of the most active markets in Africa with a trillion capitalization. The money some fat guys make from it is mind-boggling.  Just in the last year 12 investors made 27 billion from it. The rationale advanced for not taxing these colossal gains is to encourage investors in to the country. But is it justifiable when it leads to taxing some other poor guy’s daily bread. It is not fair at all.
 Rumor-mills have it that the VAT bill was sponsored by the IMF. If that is true then it is a confirmation that the brentwood institutions do not wish to see Africa shed its dependency syndrome.They are always against Africa subsidizing its food production.
With the recent development in the political arena, it seems we are being prepared for something worse but I hope the government is wiser and will rescind its decision to tax essential commodities. In the meanwhile please fasten your belts for a roller-coaster economic ride.