Cost of commodities set to rise after fuel tax

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The price of maize and subsequent cost of living is set to increase following the implementation of the 16 per cent VAT tax on petroleum products, the Cereal Millers Association of Kenya has confirmed.

According to the millers increased operational costs will merit the hike in maize and wheat prices all over the country. This will have overarching effects on the already struggling Kenyan populous.

In a statement, Cereal Millers Association chairman Mohammed Islam said the fact that millers can longer claim VAT on production of wheat and maize flour after a recent change in the status of VAT for processed wheat and processed wheat and maize flour.

Consequently, the change in status will affect the costs of flour processing, packaging, distribution and grain handling.

The VAT tax that came into effect on September 1 has adversely affected the Kenyan economy with matatu fares increasing by at least 20 per cent in most regions of the country.

Self-governing petroleum distributors have boycotted the implementation of the tax by refusing to supply the product which has led to a deficit of the precious commodity.

The Kenya Independent Petroleum Dealers Association (KIPEDA) have also reiterated that they will be on strike until the government discards the tax. This could escalate the situation even further.

The VAT tax was set to be suspended after members of the National Assembly voted to postpone the implementation of the Finance Bill 2018 to the year 2020.  However, undeterred by the MPs decision, Treasury Cabinet Secretary Henry Rotich instructed the Kenya Revenue Authority (KRA) to implement the levy.

Kenyans are set to feel the pinch of the hike in price after having enjoyed significantly low maize flour prices that were attributed to the great yields from Western Kenya and affordable grains from Uganda.

The cost of a bag of maize had dropped to Sh2,000 in August from Sh3,200 that subsequently left enough room for millers to cut costs for consumers.

The association of millers has also urged the Treasury to review the taxation plans so as to spare Kenyans of the burden of inflammation.

Those boycotting the tax implementation saw their efforts dealt a huge blow on Tuesday after the High Court refuted to suspend its implementation.

Local leaders have urged President Uhuru Kenyatta; who is currently in Beijing attending the Forum on China-Africa Cooperation (FOCAC), to assent to the parliamentary amendment to suspend the implementation of the tax to 2020.

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