Proposals in the VAT bill 2012 if passed will hit the common citizen hard by increasing the cost of items on shelves. The draft bill which was discussed and approved by the Cabinet in February proposes to scrap the lower VAT rate of 12% and remove the zero rate on a number of essential items on the market.

Zero-rated goods which will become taxable at 16 % include basic food items like Milk and cream (except unprocessed milk), maize and wheat flour, ordinary bread, gluten bread and unleavened bread. The bill also proposes to tax sanitary towels and tampons, medical dressings and plasters. The learning front has not been spared either as writing or drawing chalk, newspapers, journals and periodicals, exercise books and printed books, Cinematographic cameras and projectors will also face the standard 16% VAT rate proposed.

Scrapping the lower 12 % VAT rate will see zero-rated services become taxable at 16 % VAT. Some of these services include electrical energy to domestic households, services in respect of goods in transit, landing and parking services provided for aircraft, water drilling services and services to film producers.

This will essentially increase the cost of  these items and services by margins that would enable retailers recover the tax cost from consumers. The general cost of the now VAT applicable items in addition to those already in the bracket will put a heavy burden on consumers in the country.