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Team pushes for longer grace period on fuel VAT

By Roselyne Obala | Published Thu, March 15th 2018 at 00:00, Updated March 14th 2018 at 23:31 GMT +3
Kenyans should brace themselves for higher energy bills this year as the National Treasury tries to grow its income. [Photo by Elvis Ogina/Standarrd]

Parliament has lobbied the Government to postpone the implementation of new taxes on petroleum products that could result in an increase of fuel prices by at least Sh12 in five months.

The National Treasury is aiming to raise Sh34 billion in Value Added Tax (VAT) on petroleum products. This is set to take effect in September.

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Defer VAT

Legislators are concerned that the new taxes would lead to increased fuel prices hence trigger higher prices of commodities and weigh down Kenyans already burdened by the high cost of living.

The Senate’s Energy Committee has prevailed on officials from the National Treasury and the Energy Regulatory Commission (ERC) to consider deferring implementation of the VAT.

A team from the Treasury, led by Chief Administrative Secretary (CAS) Nelson Gaichuhie, however downplayed the concerns, insisting that the tax was necessary if the Government is to meet its revenue target to keep the country afloat.

According to the CAS, the Sh34 billion targeted by Treasury would help to meet the Sh1.7 trillion revenue collection projection for the next financial year.

“If you increase the price of diesel, everything else goes up,” warned committee chairman Ephraim Maina, who is the Nyeri senator.

The legislators expressed concern that fuel was not only one of the most taxed commodities but the consumer had also had to pay more in the form of an increase in the Road Maintenance Levy - from Sh6 to Sh18 - in 2016. 

Mr Gaichuhie also dismissed the notion that Treasury was acting under duress from the International Monetary Fund to do away with all tax exemptions as part of a wider plan to increase revenues, reduce budget deficits and ultimately slow down the pile-up of debts.

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The Treasury team was unable to explain the criteria used to extend the grace period when pressed by Narok Senator Ledama ole Kina.