More pain as VAT pushes up cost of living for Kenyans

The new Value Added Tax (VAT) Act increased the cost of living in September by a bigger margin. Inflation rate went up for the sixth consecutive month in September to 8.3 per cent from 6.67 per cent in August.  This coupled with an increase in fuel prices mid September resulted in steep rise in the cost of living.

Data by the Kenya National Bureau of Statistics ( KNBS) shows that the cost of food and other general items went up 2.87 per cent in September. The price of books and magazines went up by 6.62 per cent. Other items that went up include electricity and cooking.
Essential commodities
The surge in prices of the items was largely due to the enactment of the VAT Act 2013, that imposed 16 per cent VAT on essential commodities that included processed milk.
The new tax came into effect September 2. “The implementation of the VAT Act and seasonal factors affecting supply  of common food crops were the main causes of rise in the food index…,”  said  KNBS statement.
“In aggregate, rises outweighed falls in the average prices of various food items,” Notable is the price of milk that went up 22 per cent to retail at Sh57 per 500 millilitre, up from an average of Sh47 in August. Kenya Revenue Authority has since removed processed milk from the list of VAT exempt items. In turn, milk processors have reduced the price of milk to Sh45 per half-litre. The inflation rate is way above Central Bank’s medium-term target range of five per cent.
Other factors that caused a rise in the general price of goods and services include an increase in the retail price of fuel mid-September.  Prices of diesel, super petrol and kerosene went up by an average of Sh2 per litre of each.
“The recreation and culture index went up by 6.62 per cent over the same time mainly due to increases in the costs of newspapers, books and magazines among other items,” said KNBS. “Similarly, on account of notable rises in the prices of cooking gas, kerosene and other cooking fuels, the housing, water, gas and other fuels index rose 0.87 per cent.”
“Likewise… the transport Index increased by 0.77 per cent mainly due to increases in the public transport fares that were attributed to higher prices of petrol and diesel.”
Devolution and Planning Cabinet Secretary Anne Waiguru yesterday said the government sought to keep inflation within the single digit. “At the macroeconomic front, Kenya will seek to maintain inflation below double digits,” she said at a conference in Nairobi.