New tax measures spell doom to households using cooking gas

NAIROBI, KENYA: Kenyans could start paying more for using Liquid Petroleum Gas (LPG) if a new Bill that seeks to amend the Income Tax Act sails through parliament.

This could work against the government’s move to offer cheaper cooking gas to Kenyans as way of promoting green energy.

The Bill dubbed the Tax Laws (Amendment) Bill, 2018, is proposing to introduce some provisions and amendments in the Income Tax Act, Value Added Tax Act and Stamp Duty Act.

LPG, or cooking gas, has become common among Kenyan households, especially those in urban areas, as people move away from using the traditional, unsafe and unclean energy sources such as firewood and kerosene while embracing gas.

In the current tax laws, LPG has been zero-rated from taxation. However, the Bill proposes that LPG should be exempted from taxation.

Zero rating of goods or services means that such supplies are taxable but at the rate of zero per cent and one can claim VAT from the government while exemption means that such supplies are not taxable at all.

That means VAT is passed on as an extra cost to the consumer which will make LPG expensive.

While commenting on the proposed amendments in an alert to its clients, audit firm PriceWaterhouseCoopers (PWC ) said: “Exemption of LPG will render it more costly, which may see users of LPG revert to alternative fuel sources including unclean energy.”

The new taxation regime is expected to rub players in the energy sector wrong way if it successfully goes through parliament.

Policy influencers in the energy sector led by the Petroleum Institute of East Africa (PIEA), have in the past opposed any form of taxation for LPG.

PIEA General Manager Wanjiku Manyara in a past interview said the lobby has tried petitioning Treasury to consider treating cooking gas favourably in whatever tax measures it took, to make the commodity more affordable to Kenyans and boost the use of gas.

If the Bill passes through, equipment used in the filling and storage of cooking gas will now accrue VAT and make it expensive.

Ms Wanjiku called instead on higher taxation for Kerosene which she blamed for the rampant act of oil adulteration.

"We have seen adulterators purchase kerosene and mix it with relatively more expensive petrol or diesel to boost profits. Higher taxation for kerosene will kill this habit. Also we will be saving the environment. Kerosene is very harmful unlike LPG," Ms Wanjiku said.