New taxes to raise cost of living

The entry of new taxes taking effect on Thursday is expected to heighten the cost of living to a greater peak as the prices of basic commodities rises.

For instance, the cost of LPG gas has risen on the introduction of VAT at the standard rate of 16 per cent.

At the same time, airtime and internet data costs are set to go up after a hike on excise duty on telephone and internet data services from 15 to 20 per cent.

When the Kenya National Bureau of Statistics (KNBS) publishes July’s inflation rate at the end of the month, the report will bear a greater strain on consumer spending as prices swell.

Greater LPG costs will for instance impact the housing, water, electricity, gas and other fuels index which has the second highest weighting on inflation at 14.6 per cent.

Meanwhile, higher costs to airtime and data purchases will impact the information and communication index which has a weighting of 7.8 per cent to the average consumer prices.

With fuel and food costs remaining elevated, Kenyans are set to see a further cut to disposable income as core spending eats up household incomes and cut the potential for savings and investment.

Presently, the cost of living stands at its steepest since February 2020 with June inflation coming in at 6.32 per cent from a lower 5.87 per cent in May.

Nevertheless, Kenyans have escaped further taxes after Members of Parliament rejected further tax proposals which would have seen the cost of commodities such as bread and baby formula rise.

New taxes on telephone and internet data services were introduced through last minute amendments to the 2021 Finance Bill which was signed into law on Tuesday by President Uhuru Kenyatta.