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Government still owes oil companies Sh11b in refunds

By Patrick Alushula | February 2nd 2016

Oil companies are crying foul over the Government's failure to process their yield shift compensation and tax refunds amounting to over Sh4 billion.

Following the closure of Kenya Pipeline Refinery Limited, the oil companies suffered a yield shift loss-variation between the actual crude processing yields and the deemed yields- amounting to Sh7.1 billion.

The losses, quoted by the audit report prepared by Deloitte consulting, were as a result of the inefficiency of the closed Mombasa oil refinery. The Government has agreed to compensate the oil companies losses that they had incurred. However, despite a recovery mechanism struck in 2013, the issue remains unresolved.

In a letter seen by The Standard, the oil companies under the umbrella of Supplycor Kenya Limited wrote to the Energy and Petroleum Cabinet Secretary, Charles Keter, seeking his intervention.

"The independent forensic audit undertaken by Deloitte determined that oil marketing companies suffered a yield shift loss of Sh7.1 billion, but Sh3.5 billion was yet to be verified," reads the letter in part.

According to Supplycor chairman Polycarp Igathe, the companies had proposed to recover the money over a period of five years by charging not more than Sh0.10 per litre on retail consumer prices but no progress has since been made.

Further, Kenya Revenue Authority still owes them at least Sh1 billion in Value Added Tax (VAT) refunds. The oil players, who managed to remit Sh102 billion in taxes to the Government last year say recovering the refunds has not been easy.

"It has taken long. For example, for Vivo Energy Kenya, KRA owes us Sh650 million in VAT refunds,"explained Igathe who also doubles up as Managing Director for Vivo Energy that runs about 164 Shell petrol stations in Kenya.

Apart from VAT refunds, the taxman also owes the oil industry over Sh800 million from the road and maintenance levy. Getting such reimbursements continue to be a headache, they firms argued.

The oil marketers say that the Government is doing little to maintain the Sh102 billion cash cow that significantly helps keep tax revenue basket full. Other concerns raised by the suppliers range from delayed clearance at the Mombasa Port to lack of level playing ground.

However, CS Keter, in a luncheon with Petroleum Institute of East Africa stakeholders, admitted that he has received most of their concerns and promised that "some of them, we will addressed."

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