MPs to consider vacating VAT from fuel next week

Members of Parliament are now seemingly standing in the way between Kenyans and cheaper fuel.

This is as MPs in the National Assembly Finance and National Planning Committee begin their review of a petition to remove the value added charge (VAT) from the pricing of fuel products.

On Tuesday next week, the Committee is expected to stage a day-long public consultation forum with respective shareholders.

In a notice published in local dailies on Friday, the Committee says it will seek to establish the cause of the drastic increases in the prices of fuel, establish the amount of revenue raised from each set of fuel taxes and establish the purpose of the fuel taxes and levies.

Further, the Committee is set to interrogate the appropriateness of monthly reviews for the fuel costs, alternative sources of exchequer revenues and the impact of increased fuel prices to the economy and the general welfare of Kenyans.

Following the consultations, the Committee chaired by Homa Bay MP Gladys Wanga is expected to write a report to the House affirming or rejecting the proposal.

Curiously, the same committee snubbed a similar proposal earlier this year during its consideration of the 2021 Finance Bill.

For instance, consultancy firm KPMG had pushed to have excise duty and other fees exempted from the computation of tax on fuel products.

“The high fuel prices are unsustainable and threaten to jeopardize the economic recovery which is still facing the realities of a reduction in the disposable income of most Kenyans,” said KPMG.

“The high fuel price is therefore likely to further erode the much needed income apportionment and affordability of other essential commodities.”

In its rejection of the proposal, the committee argued such a move would result in significant revenue losses.

VAT on fuel products, charged at the rate of eight per cent was introduced through amendments introduced as part of the 2018 Finance Bill.

While MPs rejected the introduction, President Uhuru Kenyatta enforced the change by refusing to accent to the bill forcing a controversial vote which ended in favor of the President and the exchequer.

If effected today, the withdrawal on VAT would see Kenyans save nearly Ksh.10 on the price of all three petroleum commodities per litre.

This would set back the average cost of super petrol to around Ksh.126/litre.

VAT on super petrol for instance currently stands at Ksh.9.98, Ksh.8.56 for diesel and Ksh.8.21 for kerosene.

Cumulatively taxes and levies on fuel total Ksh.58.81 for petrol and Ksh.46.46 and Ksh.41.14 for diesel and kerosene respectively.