East Africa: Kenya to Reintroduce Vat On All Oil Products
Posted on :Monday , 19th October 2015
Fuel prices in Kenya are expected to increase sharply next year as the government plans to increase taxes on the commodity to raise an additional Ksh16 billion ($152.62 million).
The government will impose 16 per cent value added tax (VAT) on oil products to shore up its domestic revenues, which have come under pressure in the wake of burgeoning spending, corruption and wastage.
The tax, which is to be enforced by September next year, will make the cost of goods and services expensive, increase the cost of doing business in the country and render East Africa's largest economy uncompetitive to investors.
Motorists and households will be hard hit by the imminent taxation measures, which will see close to 40 per cent of the price of petrol per litre now comprising government taxes and levies.
Government taxes and levies per litre of diesel and kerosene will stand at around 34 per cent and 17 per cent respectively. Other taxes per litre of petrol include excise duty (Ksh19.89; $0.18), Road Maintenance Levy (Ksh12; $0.11), Petroleum Development Levy (Ksh0.4; $0.003) and the Petroleum Regulatory Levy (Ksh0.12; $0.001).
National Treasury Cabinet Secretary Henry Rotich said the three-year tax holiday currently enjoyed by oil products expires on September 2, 2016 under the new VAT Act (2013). Among these products are motor spirits, aviation spirit, jet fuel, kerosene, and gas oil.
The imposition of VAT on fuel was also part of the commitments Kenya tabled before the International Monetary Fund with a view of unlocking a $700 million precautionary facility meant to cushion its balance of payments position against external shocks.
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