Kenyan Treasury Wants 16% VAT on Petroleum Products Scrapped

NAIROBI (Capital Markets in Africa) – Kenyan legislators should repeal a law that introduced a 16 percent levy on fuel and seek other means of raising revenue, a top Treasury official said.

While the value-added tax that came into effect on Sept. 1 will add 35 billion shillings ($347.2 million) to the government’s coffers, the levy will drive inflation up by as much as 2 percentage points, Chief Administrative Secretary Nelson Gaichuhie told lawmakers in the Kenyan capital, Nairobi.

“Members should repeal the law, because I don’t see what is going to change between now and 2020, given the outcry we have witnessed,” he said Wednesday. “The best way is to do away with it and then look for alternative ways to raise revenue.”

The fuel tax was initially legislated in 2013 and parliament has delayed its implementation since, fearing the impact on East Africa’s biggest economy where fuel prices factor into not only the cost of transport, but consumer goods and electricity generation. Last month, lawmakers postponed its introduction to 2020 in draft legislation that’s yet to be signed into law through presidential approval.

Kenya is scrambling to widen its tax base to finance a record 2.5 trillion-shilling budget while still keeping the fiscal deficit below its 5.6 percent target in the year through June 2019.

“Cutting those taxes will increase the deficit and will lead to higher debt,” Gaichuhie said in parliament.

Source: Bloomberg Business News