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Consumers and employers welcome cut on VAT but expect little impact

Federation of Kenya Employees Executive Director Jacqueline Mugo.

Manufacturers and consumers lobby groups have welcomed the proposed 50 per cent reduction of value added tax imposed on petroleum products. 

Opposition chiefs Raila Odinga and Kalonzo Musyoka applauded President Uhuru Kenyatta's move that is expected to reduce the cost of living.

And Abel Kamau, the Kenya Association of Manufacturers (KAM) manufacturing sector officer said the proposed cut was a good start.

“Other measures to reduce wastage, curb corruption and expand the tax base should be taken up. Government has all the necessary tools to do that,” he said.

Mr kamau said KAM expected a readjustment of prices downwards to reflect the reduction.

“However, the prices will not go back to what they were when petroleum products were exempted from VAT,” he added.

Raila and Kalonzo said the high cost of living would come down.

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“After the budget, Kenyans cried because of 16 per cent VAT. Now that it has been reduced, the ball is in Parliament’s court," said Raila in Nairobi on Saturday.

Kalonzo urged the business community to reduce commodity prices.

“I want to applaud President Kenyatta for listening to the cry of the common wananchi and reducing the VAT. Subsequently we expect our business people to reduce the price of commodities, which they had already increased,” he said.

Kalonzo noted that fuel was the driver of the economy so when its price went up, every other sector of the economy was affected.

But Consumers Federation of Kenya (Cofek) called for changes at the National Treasury.

“Removal of tax on fuel, like retaining interest rate caps, should not be negotiable. The idea of reducing tax to eight per cent makes little impact. We still maintain that for the turnaround of our economy, the President must move with speed to make management changes at the National Treasury,” said Cofek Secretary General Stephen Mutoro.

Federation of Kenya Employees Executive Director Jacqueline Mugo said they were opposed to the tax.

"We don't support the tax on fuel given the push-up effect it will have on other essential goods. The ordinary Kenyan is already struggling to make ends meet. We need to address the real issues affecting the economy. There is a need to reduce the cost of governance and the culture of waste and plunder."

Lawrence Njagi of Kenya Publishers Association welcomed the reduction but said Government should focus more on improving productivity than consumption.

“Zero-rating would have been better. But any reduction is welcome though it has little effect on the high cost of living. Petrol prices affect all sectors. It will affect the production of books and we will pass the extra cost of books to consumers,” Mr Njagi said.

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