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Accountants ask state to reconsider taxes on bread, vehicles and digital transactions

Bread on sale at a store in Eastleigh, Nairobi, on March 14, 2024. (Photo: Justine Ondieki)

By Alfred Onyango | Tuesday, June 4, 2024

ICPAK says the proposal to reclassify the supply of ordinary bread from zero-rated to standard-rated will increase the product’s price, as it is a staple food for most Kenyans.

The Institute of Certified Public Accountants of Kenya (ICPAK) has called on the government to reconsider tax proposals on bread, digital transactions, and vehicles due to their significant ramifications for the public.

ICPAK says the proposal to reclassify the supply of ordinary bread from zero-rated to standard-rated will increase the product’s price, as it is a staple food for most Kenyans.

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“Globally, the demand for baked products has been on the rise. The demand is expected to grow by 13 per cent by 2025 for a variety of bakes. The African market is expected to grow by 6.9 per cent while the Kenyan market is expected to grow by 6.7 per cent for the next 20 years,” ICPAK said in a statement on Monday.

“The prospect could, however, change with the new tax.”

The institute added that the development comes amid increases in the price of wheat, which have hit household's disposable budgets harder.

ICPAK said the government should retain bread and other related wheat products as zero-rated to make them affordable to the majority of Kenyans, who are grappling with the high cost of living.

On the proposal to introduce a motor vehicle tax of 2.5 per cent, payable based on the value of the unit, the institute noted that it comes against the backdrop of revised insurance premium rates and high fuel prices, inevitably shoring up the cost of operating vehicles in the country.

“This will have a negative impact on the transport and logistics industry, which may opt to pass the additional cost to customers, thus escalating the cost of living through the multiplier effect, not only to insurance companies, spare-part dealers, car-service dealers, local assemblers, and importers but also to the common citizen,” it said.

The accountants' body further decried the proposal to increase VAT on banking and insurance services.

Finance Bill, 2024, proposes to increase the excise duty, from 15 to 20 per cent, on telephone and internet data services, fees charged for money transfer services by banks, money transfer agencies, and other financial services, and fees charged for mobile money transfer services.

“These may lead to a decrease in the number of transactions, thus resulting in a decrease in excise duty collection,” ICPAK warned.