A week ago the cabinet moved to exempt foodstuffs, seeds, and exercise books from the effects of the controversial VAT Bill 2012. However, KRA wants VAT charged on all items. KRA Commissioner General John Njiraini spoke to the media during ICPAK's VAT Bill Forum on August 14th 2012 and was keen to advise the government to ensure it formulates tax policies that will serve long-term demands as opposed to meeting short-term demands.

[READ: Food Items to be Exempted From VAT]

According to the Business Daily, KRA is making the proposition that VAT be charged on all items, but taking special priorities only in specified cases through new policies while in the case of exercise books the 16% tax be charged and special consideration (through a government subsidy) be given to books destined for public schools.

VAT accounts for about 27% of the annual revenue. However, according to tax experts, without the exemptions, it would account for between 40% and 45%. If passed into law, this Bill will affect several items including insecticides and pesticides, fertilisers, livestock feeds , bread, maize, wheat, milk, cream, seeds, water pumps, and  gin cotton.

According to the cabinet papers, the immediate result of removing the exemptions, would be to raise an extra KES 5 billion worth of government revenue.