President William Ruto’s effort to bring back an unpopular fuel tax that his predecessor was forced to drop reveals leaders’ double-talk on a topic of great public concern and rekindles the politics that surround petroleum pricing.
Kenyans have been advised to prepare for higher living expenses starting on July 1 in the event that a proposal in the Finance Bill 2023 to subject petroleum items to a 16 percent Value Added Tax (VAT), up from the current eight percent, is put into effect.
In its analysis of the Bill, the auditing company KPMG issues a warning that the proposal “is likely to have an impact on the prices of transportation and the production of goods, increasing the inflationary pressure on the economy.”
On Sunday, May 7, matatu owners issued a warning to commuters that fee increases would be unavoidable if increased gasoline taxes were enforced.
“We know very well that products must be transported to consumers, so every product’s price will increase,” said Simon Kimutai, chairman of the Matatu Owners Association.
The push to raise the VAT on fuel to 16%, following in the footsteps of former President Uhuru Kenyatta who unsuccessfully tried to do so in September 2018, has sparked a storm in President Ruto’s Kenya Kwanza administration, which in March entered into a deal with the United Arab Emirates to import fuel on credit for up to one year to ease pressure on dollar demand.
Kenyatta administration was confronted with a strike by some oil dealers, protests from commuters, and legal action, Following the implementation of the 16% VAT on all petroleum products which led to an increase in transportation and gasoline expenses.
House session was on heat that several MPs walked out of the National Assembly, making then chairperson of the Committee on the Whole House Soipan Tuya to order a recount to establish quorum. Upon the House reverting to plenary, then Speaker Justin Muturi had a hard time calming the situation after MPs faulted the voting system. The Speaker suspended the sitting for 15 minutes to allow parliamentary staff to assess the problem.
Households using cooking gas will benefit from the Finance Bill of 2023 thanks to the government’s proposed exemption of 8% VAT on liquefied petroleum gas (LPG).
Prices of basic commodities are expected to continue to increase if the government increases fuel prices as a result of newly introduced taxes at a time fuel subsidies have been withdrawn.
The increase of fuel taxes goes against President Ruto’s election promises that included removing taxes on fuel to lower its cost and reduce the cost of essential commodities
A 16% VAT on LPG had been enacted by the Finance Act of 2020, however its introduction was postponed to July 2021 due to worries about rising living expenses.
The eradication of gas taxes will boost efforts to adopt green energy to positively impact the climate.
This is part of President Ruto’s initiative to reduce cooking gas prices nationwide.
By June 2023, President Ruto intends to lower the price of a six-kilogram gas cylinder to Sh300 or Sh500.
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