VAT On Books Is Hurting the Education Sector

• By Jediel Kimathi
• 16 December 2015
• legal Insights
• Commercial

Prior to September 2013, the government, in appreciating the importance of learning materials, had zero rated the supply of exercise books, dictionaries, encyclopedias and other printed books. This was also in line with Vision 2030 that singles out education and training as the vehicle that will drive Kenya into becoming a middle-income economy.

However, due to the desire by the government to expand the Value Added Tax (VAT) net, through the current VAT Act, 2013 it introduced VAT at the standard rate of 16 per cent on the supply of text books, exercise books and other printed books.

Since the introduction of VAT, the cost of books and other learning materials has continued to increase, significantly impacting the education sector.

Whilst, the various players in the supply chain of published books have been adversely affected, the final consumers of books and other printed material are the most affected. The VAT increase has led to a reduction in access to learning materials by a majority of the population thus compromising the quality of education in the country.

Books usually pass through three points of sale i.e. publishers, printers and book sellers before reaching the final consumer and VAT is charged and accounted to the Kenya Revenue Authority (KRA) at every point of sale. That said, it is worth noting that the VAT law allows VAT registered traders to recover the VAT incurred on their purchases by offsetting this against the VAT charged on sales.

Effectively, the publisher, printer and book seller are entitled to recover VAT incurred on their purchases by offsetting such amounts against the VAT charged on their sales. The final consumers bear the full burden of the VAT as they are not entitled to recover any VAT as they are not registered for VAT. With the increased prices of published books, the demand for books has fallen as buyers can only afford less or no books. Despite the government buying some textbooks under the Free Primary Education programme, most books are still being purchased by parents and schools.

Piracy has flourished as plagiarised books are not only available at reduced prices but are in certain instances of the same or higher quality than genuinely published books. Pirates collude with some bookshops and schools to sell the books at lower prices. Taxing books undermines the spirit of the Constitution and Vision 2030 that aim to provide affordable education to the population.

Whilst competitiveness is key to the government´s vision for growth, the VAT charged on books has had adverse impact on the country´s education sector and business environment, both of which are at the heart of the government´s growth vision. Perhaps, it is time the government considered reverting back to the zero-rating of supply of books and other learning materials to align its VAT policy to the majority of its African counterpart´s as well as international best practice.

The final consumers of books and other printed material are the most affected.