Entry Instance

HTTP 200 OK
Allow: GET, PUT, PATCH, DELETE, HEAD, OPTIONS
Content-Type: application/json
Vary: Accept

{
    "id": 1254212,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1254212/?format=api",
    "text_counter": 163,
    "type": "speech",
    "speaker_name": "Prof. Njuguna Ndung’u",
    "speaker_title": "The Cabinet Secretary, National Treasury and Economic Planning",
    "speaker": null,
    "content": "zero-rated. This has impacted the tax expenditure. To bring down the tax expenditure and also align with the international best practices, I propose to the National Assembly to rationalise goods and services in the First and Second Schedules of the VAT Act by transferring some goods and services from zero-rating to exempt status and from exempt status to taxable at the standard rate. Over the years, petroleum products have received preferential tax treatment, gradually transitioning from exempt status in 2013 to 2018 and 8 per cent from 2019 to date. This is irrespective of the fact that suppliers of petroleum products claim other input tax at the general rate of 16 per cent. This means that the Government has been sharing the input tax burden with the businesses by subsidising the difference between the general rate of 16 per cent and the preferential rate of 8 per cent. As a result of those practices and outcomes, the oil marketers have been in a perpetual credit position and not paying VAT to the Exchequer. This practice is discriminatory as businesses in other sectors of the economy bear the input tax by recovering the same from output VAT charged on the final consumer. Hon. Speaker, on reviewing the VAT rate on petroleum products to the standard rate, such businesses would, at the outset, recover the VAT credits that they have been carrying forward over the years, and Government would end up collecting VAT after some time. If the anomaly is not corrected at the earliest stage, the build-up of credits will continue to increase. If the Government seeks to charge VAT at the standard rate in future, it will take years for them to collect the much-needed revenue from this sector since the credits have to be exhausted before the businesses start paying VAT. The continued practice by the Government to subsidise the cost of fuel by levying a preferential rate of 8 per cent distorts the market. Yet, the economy should be operating on the principles of demand and supply. In this respect, I propose to the National Assembly to amend the VAT Act to remove the preferential rate on petroleum products so that the products will be subject to a standard VAT rate of 16 per cent. The blue economy remains largely untapped, despite its huge potential. This is particularly due to low investments in maritime activities over the years. In order to spur investment and attract international sea freight in this sector, I propose to the National Assembly to zero rate inbound international sea freight offered by registered persons. The Government will continue exploring ways of providing more incentives to promote investment in this sector. Currently, machinery used by pharmaceutical companies is exempt from VAT on importation. This is meant to complement the Government’s efforts to ensure that all Kenyans have access to affordable healthcare. However, we have received numerous petitions to extend the exemption to locally purchased machinery to further boost access to healthcare services. In this regard, I propose to the National Assembly to amend the VAT Act to extend the exemption to machinery and equipment purchased locally for use in the manufacture of pharmaceuticals. In order to address the escalation of tax expenditures and foster prudent utilisation of fiscal resources, I propose to the National Assembly to remove VAT exemptions in respect of taxable services supplied for the construction of specialised hospitals, goods and services for the construction of tourist facilities, goods worth more than Ksh2 billion purchased by manufacturers as well as plant machinery and equipment used in the construction of plastic recycling plants. Currently, business transfer as a going concern is subject to VAT at a standard rate. Taxpayers have raised concerns that this discourages business re-organisation and the sale of the business. In this regard, I propose to the National Assembly to amend the VAT Act to exempt business transfers as a going concern. This is expected to encourage mergers and acquisitions, boosting business growth and efficiency. Hon. Speaker, I now turn to proposed amendments to the Excise Duty Act, 2015. The Act provides for the remittance of Excise Duty to KRA by the 20th day of the following month. The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
}