Government Proposes VAT Increase on Petroleum Products: Brace for Higher Fuel Prices
If the Finance Bill 2023 is approved by the Kenyan legislature, the price of gasoline could increase by more than Ksh.10 per liter.
The bill currently pending before the Finance and National Planning Committee seeks to reverse a 2018 decision that reduced the VAT on fuel to 8% to provide Kenyans with relief.
By modifying a clause that seeks to harmonize the VAT act, the VAT on fuel will double to 16 percent, resulting in a price increase of more than Ksh.13 per liter based on current prices.
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“One of the government’s motivations for removing the 8% could be to harmonize the VAT act’s two clusters.” The 0% and 16% rates. Fuel is the only commodity subject to an 8% tax, according to Senior Tax Manager Fred Kimtho.
This proposal will substantially increase the price of fuel, a crucial commodity for the Kenyan economy. This will have a domino effect on production costs and consumer goods in general.
Petroleum products are among the most heavily taxed goods in the country. Being subject to a total of nine levies, including the Road Maintenance Levy. Excise tax, Petroleum development levy, Petroleum Regulatory Levy, Railway Development Levy rate. Anti-Adulteration Levy, Merchant Shipping Levy, and the contested VAT.
As a result of a deal with the government of the Middle East, the government’s latest action is seen as counterproductive, as it undermines the efforts made to facilitate the importation of fuel from the United Arab Emirates.
The deal, which aimed to reduce the price of fuel, permitted Kenya to delay payments for oil imports for up to six months to reduce the dollar demand.
Government Proposes VAT Increase on Petroleum Products: Brace for Higher Fuel Prices
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