Unga prices set to rise further in new tax proposals

The cost of unga is set to remain elevated should new proposals carried in the Draft National Tax Policy by the National Treasury take effect.

The policy document has proposed to limit VAT zero rating to exported goods which would see the maize flour, cassava flour, wheat and meslin flour removed from the list of zero-rated supplies.

This means that manufacturers of the product will not be able to claim reimbursement for input VAT setting off even higher prices for the already premium-priced goods.

“VAT zero rating shall be limited to exported goods except transportation of passengers and supply of taxable services by carriers on international voyage or transportation of goods by land for destination terminating outside Kenya,” reads part of the draft National Tax Policy.

Nevertheless, should the proposal take effect, unga will not attract VAT which is charged at the rate of 16 per cent as the four products are still listed under the VAT exempt supplies according to the latest updated VAT Act.

The listing of unga under exempt supplies means the supplies would still be set aside from VAT but its supplies would not be able to claim for input VAT from the Kenya Revenue Authority (KRA).

The National Tax Policy, currently a draft, seeks to create an efficient and fair tax system that promotes equity in tax administration and assures a predictable tax environment for business to operate.

Additional proposals in the policy seek a return to presumptive taxation in an attempt to expand the tax base to enterprises in agriculture and the informal sector.

Targets under the policy include growing ordinary revenue as a share of GDP to 15.3 per cent while enlisting an additional 2.1 active taxpayers to raise the total number of taxpayers to 8.2 million.

Earlier this year, MPs voted to keep the supply of maize flour, cassava, wheat and meslin flour in both zero-rate and exempt lists with the view of keeping the prices of the four products unchanged from taxation.

Changes in the taxation of the supplies could prove to be an Achilles heel in bringing down the cost of unga for Mwananchi.