President William Ruto's administration has proposed sweeping changes to the country’s Value Added Tax (VAT) system that will see the government raid pockets of millions of Kenyans in the cost of various commodities. 

Top on the list is the increase in the price of bread and a mandatory tax for all motor vehicle owners in the country as the government funds the 2024-2025 budget.

Treasury has proposed to paste VAT on bread, with a proposed rate of 16 per cent after removing bread from tax exemption. As a result, consumers may experience a sharp rise in the cost of bread.

Under the proposed changes to the VAT, a 400g loaf of bread could see a price hike of at least Ksh.10, raising the average cost from approximately Ksh.65 to around Ksh.75.

In the 2024-2025 tax plan, vehicle owners are to pay annual taxes as the bill notes that, “A tax known as Motor Vehicle Tax shall be payable to the commissioner on each motor vehicle at the time of the issuance of an insurance cover.”

The motor vehicle tax has been pegged at 2.5 per cent of the value of the vehicle and shall not be less than Ksh.5,000 and shall not be more than Ksh.100,000.

An insurer of a motor vehicle shall collect and remit motor vehicle tax within five working days after issuing a motor vehicle insurance cover.

Revellers have not been spared either Lovers of wines will pay more with a proposal to charge Ksh.243.43 per litre. 

Lovers of beer will however pay less with the new bill proposing Ksh.142.44 per litre down from the current Ksh.253 per litre. Those who partake in spirits and whiskeys will sip bitter with the current bill increasing its tax to Ksh.356.42 per litre. 

The Finance Bill 2024 suggests eliminating VAT exemptions for several financial services, including issuing credit and debit cards, telegraphic money transfer services, and cheque handling, processing, clearing, and settlement including special clearance or cancellation of cheques.

Telephone and internet data services have gone up from 15 to 20 per cent.

Money transfer services have also seen a sharp increase with the bill proposing a rise from 15 to 20 per cent.

Betting, gaming and lotteries have also seen a proposed increase of upto 20 per cent from 12.5 per cent.

Other changes include VAT on mosquito repellents, tea packaging material, foliar feeds and bio-stimulants as well as agricultural pest control products

As the bill prepares to get to parliament, Kenyans are already preparing to start payments in the Social Health Insurance Fund (SHIF).