House team backs plan to cut tax on fuel as prices ease
The House Finance and National Planning Committee has proposed a plan to cut taxes to check high fuel costs in its report on investigating the runaway cost of fuel in Kenya.
Among the proposals by the Committee include cutting by half Value Added Tax (VAT) on fuel to four per cent from the current eight per cent and the halving of the rate of VAT on cooking gas from the current 16 per cent.
The proposals will call for the amendment of VAT Act 2015 to reflect the change in the tax rate for petroleum and petroleum products.
In 2018, President Uhuru Kenyatta was forced to revise by half VAT on fuel to 8 per cent after the introduction of the full tax, largely recommended by the International Monetary Fund, sparked public outcry.
Other proposals floated by the House team include the reduction of oil marketing companies’ supplier margins by Kes3 to Kes9 and the waiver of inflation adjustments on excise duty for fuel for the remainder of the current fiscal year.
The set of proposals by the Homabay MP Gladys Wanga led committee will now be the subject of consideration by the entire floor of the National Assembly before subsequent ratification into law by President Uhuru Kenyatta.
While appearing before the Finance and National Planning Committee in September, Energy Petroleum and Regulatory Authority Director-General David Kiptoo turned the heat on the Treasury and Petroleum ministries as well as the MPs noting that they have final say on the taxes charged on fuel products in the country.
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At the moment, fuel consumers in Kenya pay up to Kes58.81, Kes46.46 and Kes41.14 in taxes for every litre of petrol, diesel and kerosene respectively.
In the four months to August, this year, the government spend Kes8.7 billion to cushion Kenyans against sharp rise in fuel prices under the petroleum price stabilization fund.
The financial tool was, however, withdrawn during the September fuel price review, sending the cost of the commodity to historic high.
In the October review, however, there was slight relief at the pump as petrol and diesel prices fell by Kes5 per litre while that of kerosene dropped by Kes7.28.
The price cuts were largely a factor of the restoration of the price stabilization mechanism which draws funds from the petroleum development levy following its freeze in September.
For the next one month, a litre of petrol in Nairobi will retail at Kes129.72 down from Kes134.72 while diesel will now cost Kes110.60. Kerosene prices will meanwhile settle at Kes103.54 per litre.
Oil marketing companies have once again taken a hit as supplier margins were cut to Kes6.26 for the supply of petrol and Kes5.50 and Kes7.73 for the supply of diesel and kerosene respectively from the usual margins of Kes12.39 for petrol and Kes12.36 for diesel and kerosene.
