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Taxes and fuel prices: How high will State take them?

**Why are fuel prices skyrocketing, more so when our leaders are away?** [iStockphoto]

At around midnight on Thursday, I stopped by a petrol station and filled up my tank.

I found several other Kenyans doing the same before prices shot up by a whopping Sh16.96 a litre for petrol and Sh21.36 for diesel. We saved a few shillings for the day. Why are fuel prices skyrocketing, more so when our leaders are away?

One possible explanation is that the price hike last month was postponed. This was a ‘double hike’. I do not think that global petrol prices are that high to warrant such a hike.

The other possible explanation is that its pays time after the government-to-government oil deal. We need dollars to pay for it and its value has gone up - you need more shillings. The removal of subsidies or price stabilisers is another factor. Can we stretch the truth and ask if the high fuel prices are the first step in reducing climatic change?

What else could explain such a steep rise in fuel prices when Kenya Kwanza government is celebrating one year in power? Could it also be a political message that ‘we are in power’? How will Kenyans react?

Exhausted by taxes, joblessness and pessimism, Kenyans have learnt to be helpless. Perhaps this hike in fuel prices is a sign that we have been tamed into total submission. We make jokes about fuel prices and then move on. One joke is calling Kenya ‘Taximenstan’.

The political reaction will be muted too. The ‘talks about talks’ have slowly punctured the spirited opposition to the high cost of living. The high prices are a double-edged sword. Why did you demonstrate when prices were so low? If you call demonstrations, you will hear, “Why do you want to make matters worse?”

The prices dovetails with the thinking: If you have to make painful decisions, make them now and hope dividends will be shared by 2027. Remember we all suffer from short memory.

Firms will try and reduce costs; expect some layoffs, a shift to remote working, and more outsourcing. We hope few will close shop squeezed by taxes and now higher fuel prices. Entrepreneurs will raise the prices of goods and services.

Employees are on the receiving end, with sticky wages. Some firms could even cut wages to stay afloat. Remember the Covid-19 days?

It’s at the individual level where we have the liberty to react to fuel prices. Anger is the top reaction. Without safety valves to express anger like sports, most citizens will look inward - and hope no domestic violence or suicides.

We shall change our consumption patterns. Walk to work, take fewer trips for leisure. Call instead of meeting. Change our diet, postpone big projects if any.

Unfortunately, lots of Kenyans live on the margin with no savings. And we have no welfare beyond our immediate family members. Expect calls for help. And, unfortunately, some conmanship too.

We hope that those with business ideas can finally actualise them, and get another source of income. They need money to actualise these ideas, but interest rates have gone up too.

Two things worry me. One is that many citizens are stretched to the limit economically. How will they absorb this new shock? The other is that once stretched to the limit, we could start living for today, saving less, or drawing on our savings. Hopelessness could engulf the country.

We could even become reckless, taking more alcohol, drugs or partaking in other activities that we think make us happy.

Where do we go from here?

Why can’t we let the market do its work? Why do we still set the monthly fuel prices? Can the government remove some fuel taxes and look for an alternative source of revenue? The best example is making the business environment more conducive; we expand our enterprises and pay more VAT and income tax for our employees.

Could high fuel prices and taxes spur us to work harder, leading to a spurt in economic growth? We all hope so. Will such prices make us innovative like shifting to electric cars faster?

From the affluent to the poor, a cloud of economic gloom hangs over the nation. Who will convince Kenyans that things will get worse before they get better? Who will turn economic pessimism into optimism?

Shall this gloom make us ‘human’ and start seeing each other as the cause of economic problems? Shall we start scapegoating? Shall we find refuge in ‘our’ people, accentuating tribalism and corruption? Will some leave the country and seek greener pastures? Is that why there is a crisis in passport issuing?

What happened to the political promises that the cost of living would go down after the polls? One Kenyan put it aptly: “The hard economic times will usher in new political consciousness, that our vote really matters.” Before that vote in 2027, a lot will happen on the economic front. And, it seems, without national smiles.

How high will taxes and fuel prices go? It seems as long as Kenyans can bear. After all, the roads are still full of cars.

Finally, how much shall I save if I convert my Vitz into gas fuel? Any offers? How have you reacted to rising fuel prices? Talk to us.