Reprieve for motorists as parliament defer 16 percent VAT on fuel

By Victor Nabiswa

It’s a temporary reprieve for Kenyan motorists and commuters after Members of Parliament voted to suspend the implementation of 16% Value Added Tax on petroleum products from taking effect following public uproar.

The bill which was sponsored by Minority Chief Whip Junet Mohammed sought to amend Clause 18 of the 2018 Finance Bill, to postpone the fuel levy increase which was supposed to take effect on September 1st by two years.

“This House has been accused of not being sensitive to the need of the people. It is time we side with them and I plead that we postpone this tax to 2020,” Junet said on the floor of the House.

The move follows announcement from the Chairman of Matatu Owners Association Simon Kimutai, who had notified commuters of the looming increase on bus fares especially in Nairobi by Sh10 or Sh30.

If the suspension is approved by President Uhuru Kenyatta, then the new interest rates will now take effect on September 1, 2020.

VAT on petroleum products was introduced in the VAT Act 2013 but was deferred for a period of three years.

The deferral was further extended for a period of two years which is set to expire on September 1, 2018.

It’s believed that fuel products are part of Kenya’s most taxed products. At the port of Mombasa, a litre of Super Petrol is priced at Ksh.57.53. Storage and distribution charges amounting to Ksh.4.41 are further added to this figure, while a profit margin for importers is set at Ksh.7 a litre. Dealers have a margin of Ksh.3.89.