KENYA –  Kenya’s President William Ruto has stepped in to address the Treasury’s proposal to impose a 16 percent tax on bread, a move that would have resulted in an estimated KES10 increase in the price of a 400-gram loaf.

This is following the proposed Finance Bill 2024, which, if enacted, could push the cost of a 400g loaf from the current average of approximately KES65 to around KES75.

On Monday afternoon, President Ruto convened a meeting with representatives from the National Treasury and the Central Bank at State House Nairobi.

Sources familiar with the discussions disclosed that the President instructed Cabinet Secretary Njuguna Ndung’u of the National Treasury and Kimani Kuria, Chairman of the National Assembly Finance Committee, to ensure the withdrawal of the tax proposal.

Ruto expressed concern over the potential impact on consumers already facing a high cost of living.

During the meeting, he stressed the need for deliberate economic management, aiming to lay the groundwork for Kenya’s transformation while prioritizing the welfare of its citizens.

Earlier in March, CS Ndung’u had defended the proposed tax, arguing that zero-rating bread and milk had not effectively benefited low-income households, rather it benefited the middle class.

He noted that bread and milk, mostly consumed by the middle class, accounted for 95% of total value-added tax (VAT) refunds, adversely affecting government revenues.

When we started doing some simulation work, we realized that we could gain a lot. Once you have high tax rates, the political remedy is often to try and create a rebate or should I say create refunds for some of the institutions dealing with products that are related and being considered to be consumed by the poor,” Prof Njuguna said.

According to him, VAT constitutes approximately 40% of total taxes collected in Kenya, with 18% allocated to tax refunds for products assumed to be consumed by low-income households.

Consequently, the Treasury’s decision to introduce a 16% VAT on bread and milk was aimed at bolstering revenue collection from middle-class households.

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