The Impact of Value Added Tax to The Telecommunication Industry; A Case Study of Saf Aricom Kenya.

CHAPTER ONE

 1.0 Introduction Value Added Tax has of late, emerged as one of the most important financial innovations of the century. According to Domestic Taxes Department V.A.T at a glance (2006/2007), VAT is a consumption tax charged on both local sales and importation of taxable services. VAT is tax payable to the Kenya Revenue Authority (VAT department) by registered traders who are registered with the department for VAT purposes. According to the Kenya Revenue Authority Income Tax Department, Excise duty is a tax imposed on specific local and imported goods. Excise duty is a tax payable to the Kenya Revenue Authority by traders who are supplying excisable goods or services. 1.1 Background of the Study VAT The Value Added Tax was introduced in 1973 as part of a comprehensive reform of the tax system undertaken by the conservative government in the United Kingdom. Up to date most countries in the world have introduced VAT as part of their taxation system. According to Rajesh shah (2006), VAT is a broadly based consumption tax that replaced sales tax. This VAT is charged fully or is borne fully by the consumer of a taxable supply. VAT is paid by any person/body that purchases any commodity on which VAT is liable for 1 payment. The VAT is paid to the suppliers of the commodity. VAT as a new system of taxation was not well received in Kenya, especially by the business community. In the beginning in Kenya VAT was made compulsory but currently, it is mainly big businesses, companies and organizations with a huge threshold of not less than 5 million Ksh in a limit of 12 months, 4,250,000 Ksh in a limit of 9 months, 2,500,000 Ksh in a limit of 6 months, I, 750,000 Ksh in a limit of 3 months that are registered for VAT.