The over emphasis on tax simplification in the VAT Bill 2013 is in itself a complexity. This need for simplification that has been used as a rationale for a standard rate of 16% for all taxed goods and services has too many grey areas.
It beats logic to tax everything at the same rate as different goods and services operate in different market dynamics that may merit higher or lower taxes. For instance, in case of an acute shortage in say maize, you might be excused to reduce its VAT which does not necessarily require you to reduce the VAT of say petroleum products.
The rationale therefore, of raising the VAT of electricity currently taxed at 12% to 16%, is unwarranted especially in the face of the fact that our economy is being stifled by high cost of inputs, notable being electricity.
This is further complicated with the fact that the Principal Secretary can reverse the tax by 25% upwards or downwards meaning it could either be raised to 20% or lowered to 12%.
It is not however indicated in the Bill whether this will be a blanket raise or lowering. It is however safe to assume that it will be so, given the insistence on a standard rate of 16% just so tax collection can be simpler.
I wouldn’t deem it wise though. What would be the rationale of say lowering all taxes to 12% if there is a crisis of girls dropping out of school because they cannot afford sanitary towels (to be taxed at 16% in VAT Bill)?
I think there should be different categories like ‘Basic Commodities’ (overtly described and parameters for defining them set) that should be taxed either at 12% or exempted all together. The proposed tax on electricity, unless justifiable by another reason, should not be raised in order to stimulate SMEs who find the current rates inhibiting.
Then there is the case of vesting powers of raising and lowering tax on the Principal Secretary. Ever heard of the Boston Tea Party? Well, the Americans set precedence by rejecting the Tea Act in 1773 because it violated their rights to be taxed only by their elected representatives. It is immoral to put all the taxation powers on one man, in the executive. Albeit our legislative members seem more poised to represent their political parties rather than their electorate who would suffer if such tax is imposed, it is better to vest power on a democratically elected legislature than an executive appointee.
By Otiato Guguyu - Intern