VAT on Solar is a step backwards reducing chances of achieving the 2022 universal energy access goal

While it might be understandable that the government requires revenue, the income expected to be realized by Kenya Revenue Authority (KRA) from VAT on solar products does not warrant the negative impact that this tax has on the underserved communities.

Taxing this sector will constrict its growth which will mean fewer jobs both within the companies providing energy and the communities reliant on that energy. It will have the opposite of the intended effect (a) Government revenues (from increased productive use and formalized jobs), (b) Health (electrified clinics, vaccine cold chains, reduced pollution from fossil fuel use), (c) Environment (reduced emissions of climate-warming greenhouse gases).

It should be noted that VAT on solar products are already applied in the construction and maintenance  of mini-grids and that the VAT exemption was removed from the imported solar panels, batteries and related equipment which is about 1/3 of the total CAPEX of a mini grid.

Removing the VAT exemption is an additional taxation on the poor.

Read more: The East African Business Times Magazine



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