The Central Organization of Trade Unions (COTU) has called on the government to reconsider its proposal to double VAT on petroleum products from eight to 16 per cent.
COTU SG Francis Atwoli in a statement on Friday said the move will have severe consequences on job creation and economic growth in the country.
Atwoli said the increase in VAT will force small-scale traders to close down their businesses and thus have a negative impact on jobs and growth.
“By increasing the VAT, Kenyans, either unemployed or employed, will be unable to have the needed purchasing power for both goods and services,” Atwoli said.
“Consequently, the economy will fail to grow considering most goods and services will be unaffordable to a majority of the working men and women.”
According to the COTU boss, Kenyan economy will suffocate due to low money circulation and the plan by government to introduce 'punitive' VAT measures which will consequently make goods and services expensive.
Atwoli instead proposed that high taxation be on goods such as motor vehicles, alcohol and spirits, and other non-essential commodities adding that the current proposal will have far-reaching effects on both the poor and the rich.
“It is thus our utmost concern that if we are serious about economic growth, we cannot make goods and services inaccessible to ordinary Kenyans,” Atwoli said.
Last month, President William Ruto defended his decision to increase the VAT on petroleum products from eight per cent to 16 per cent.
The President said he intends to raise Sh50 billion from the enhanced VAT on petroleum products.
The President said the move is important to seal loopholes being exploited by businessmen to deny the country the much-needed revenue.
"Because of the differential rates that pose a problem on integrity, it was used by people as a loophole to manipulate numbers, the advise I got was that we must eliminate this loophole people are exploiting," he said.
The President insisted that he is better informed and he is making the right decisions for the country including reducing borrowing.