MPs snub push to lower fuel taxes


MPs snub push to lower fuel taxes

In Summary

  • While the bill did not touch on any changes to the fuel taxation regime, advisory firm KPMG pushed to exclude excise duty, fees and other charges in the computation of the taxable value of fuel products.
  • However, the Gladys Wanga led committee shot down the proposal saying it would lead to significant revenue loss. Additionally, the committee argued fuel products were vatable at a more concessional rate of 8 per cent, a lower charge than the standard 16 per cent.
  • Meanwhile, MPs have also rejected a proposal by the Petroleum Institute of East Africa (PIEA) to waive VAT on LPG gas at the standard 16 per cent, a tax that kicks in on July 1.

Members of Parliament represented by the Finance and National Planning Committee have snubbed a push to lower taxation on fuel.

This is after the rejection of proposals made in a public consultation window in the consideration of the 2021 Finance Bill.

While the bill did not touch on any changes to the fuel taxation regime, advisory firm KPMG pushed to exclude excise duty, fees and other charges in the computation of the taxable value of 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.”

However, the Gladys Wanga led committee shot down the proposal saying it would lead to significant revenue loss.

Additionally, the committee argued fuel products were vatable at a more concessional rate of 8 per cent, a lower charge than the standard 16 per cent.

The snub by MPs is against recent uproar on the runaway cost of fuel which has been blamed largely to a heavy taxation regime by government.

While Kenya’s fuel tax regime may not be the most punitive on the globe, the cost of fuel taxation is considerably higher among regional peers.

For instance, last month, super petrol attracted taxes and levies amounting to Ksh.57.77 or 45.7 per cent of total costs.

In contrast, super petrol attracted costs of Ksh.41 and Ksh.37.98 in Uganda and Tanzania respectively.

India, Italy and France leads the globe with the heaviest taxation on fuel at 69, 64 and 63 per cent respectively.

The United States and Canada meanwhile have a more modest taxation regime at 19 and 33 per cent respectively.

Presently, super petrol cost stands at their highest on record with a litre of the commodity now costing Ksh.127.14 a litre in the Capital Nairobi.

The Ministry of Petroleum has backed the operation of a price stabilization mechanism to steady fuel costs in the country as Kenyans continue to lament the exorbitant costs.

The operation of the mechanism which has so far gobbled up Ksh.1.4 billion in tax payers’ funds is however yet clear with no regulations currently in place.

Meanwhile, MPs have also rejected a proposal by the Petroleum Institute of East Africa (PIEA) to waive VAT on LPG gas at the standard 16 per cent, a tax that kicks in on July 1.

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Story By Kepha Muiruri
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