Cooking Gas and Pension Tax Scrapped: Means More Borrowing

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Just two weeks ago, The Business Watch published an article with information on a plan to reintroduce the  14% VAT on cooking gas, a proposal made by the Cabinet Secretary in the Ministry of Finance and Planning Mr. Ukur Yattani in his 2020/21 Finance bill presented in Parliament.

Pending verification and revision from a parliamentary committee, the proposal has been voted down and scrapped amongst other proposals. The National Assembly’s Finance and National Planning committee cancelled taxes proposed on pensions, helicopters and liquefied petroleum gas (LPG).

The CS had foreseen a notable situation where he would rake out Ksh 8 billion by levying the 14 per cent value added tax on helicopters, cooking stoves and vehicle imports as well as raise about Ksh 320 million from the removal of zero rates on Liquefied Petroleum Gas and 771 million on abolishing of import declaration fees on helicopters.

Lawmakers sitting in the designated parliamentary docket said that taxation imposed on helicopter imports would hurt the aviation industry which is already hurt by the pandemic as most of the aircrafts have been grounded and would take time to recuperate in case the pandemic was maintained.

However, this move to scrap proposed taxes isn’t just what you should be happy by. This has left treasury with a gap to fill of about Ksh 840 billion giving the treasury an appetite to consider borrowing as a measure to fill the deficit brought about by the abolishment of the proposed tax measures.

The International Monetary Fund last month issued a warning saying that this policy would likely lead to an increase in debt and asked Kenya to reinstate the Corona tax lifts immediately the pandemic is contained.

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