If the new proposals included in the National Treasury’s Draft National Tax Policy become law, the price of unga is expected to stay high.
The policy document suggests restricting the use of the VAT zero rating to items that are exported, which would result in the removal of maize, cassava, wheat, and meslin flour from the list of suppliers that can be given the zero rating.
Because they will not be able to claim reimbursement for input VAT, the product’s makers will have to raise the cost of their already-exorbitant items.
“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.
However, unga won’t be subject to VAT, which is imposed at a rate of 16%, should the proposal become law because the four products are still classified under the VAT exempt supplies according to the most recent version of the VAT Act.
Because unga is listed under exempt supplies, its supply will still be exempt from VAT but will not be eligible to submit an input VAT claim to the Kenya Revenue Authority (KRA).
The National Tax Policy, which is still in draft form, aims to establish an equitable and effective tax system that supports equity in tax administration and ensures a stable tax environment for business operations.
Additional recommendations in the policy aim to increase the tax by reverting to presumptive taxation.
The policy’s goals include increasing regular revenue as a percentage of GDP to 15.3% while increasing the number of taxpayers overall by 2.1 more active taxpayers, bringing the total to 8.2 million.
In an earlier vote this year, MPs decided to keep maize flour, cassava flour, wheat flour, and meslin flour available on both zero-rate and exempt lists, with the goal of maintaining the four goods’ pricing free of tax.
A weakness in lowering the price of unga for Mwananchi could be changes in the taxes of the supply.
