Effective September 2, among other products the prices of milk, newspapers, text books, fertilizers and mobile phone handsets went up as a result of implementing the new VAT Act 2013. The previously VAT exempted commodities are being now subject to 16% VAT. Under the new law, the 12% rate for electricity as well as the electricity exemption for certain households was also repealed. In addition, effective 1 September 2016 certain petroleum products will be taxed with 16% VAT. Some essential items like maize and wheat flour, sanitary pads and rice will however remain the VAT exempt status. The changes will have a strong impact on Kenyans increasing the overall costs of living.
According to Deputy President William Ruto the purpose of the drastic VAT change is generating revenue for the nation’s development agenda. The money is scheduled to go into public constructions including road and rail system improvements. It should also help the public hospitals.
Despite the public protests of the society activists the controversial VAT Bill 2013 was signed into law by the president mid-August after a long public debate and few amendments. It was gazetted on 23 August 2013. With the KRA notice posted on September 3rd, the VAT Act became effective on September, 2nd.