Finance Bill 2023: Treasury says gov't adjusting VAT to attain tax uniformity

Treasury Cabinet Secretary Njuguna Ndung'u says adjustments which will increase VAT on petroleum products from eight per cent to 16 per cent are geared towards attaining tax uniformity in both the local and East African Markets. 

The CS was speaking at the Port of Mombasa where he accompanied his counterpart from the Ministry of Energy and Petroleum Davis Chirchir to receive the second consignment of fuel from the United Arab Emirates.

As the debate over the Finance Bill 2023 continues to gain momentum, a section of Kenyans have taken issue with its proposal to double the  VAT on petroleum products from the current 8% to 16% in a bid to raise revenue. The move that may see fuel prices go up by up to Ksh.10 amidst a skyrocketing cost of living has attracted public outcry. 

CS Ndung'u says the government will adjust the VAT to attain tax uniformity in both the local and regional markets, despite the uproar.

“By the way, we discovered that Kenya has the lowest VAT in the region; other countries have much higher than 16% even though we have the ambition to ensure that we rationalise all taxes in the future after massive studies have discovered how the market structure is working we still are conscious about what the East African market is doing we have to encourage them to follow us in terms of rationalising taxes,” he said.

CS Ndung’u however affirmed that the government will not make its final conclusion until the proposal is subjected  to proper public participation

“The budget proposals that will be presented will be coming from the conclusion of the public participation in terms of the responses and their basic propositions,” CS Ndung'u noted.

The consignment is being received after the Kenyan government signed a government-to-government deal with UAE’s Abu Dhabi National Oil Corporation (ADNOC) Global Trading for the supply of automotive gas oil and Jet A-1.

CS Chirchir on his part says that the initiative will help in stabilizing the shilling in the country.

“The G2G is working. We are progressively seeing the Kenyan shilling gingering strength which was the objective of the G2G. The G2G was basically government giving support to the oil market to say we will support the different LCs for six months and after six months they start maturing on a monthly basis and we will then put the dollar to offset the LCs,” Chirchir said.

The government is planning to revive the Kenya Petroleum Refineries Limited in Changamwe as part of its investment in storage facilities to support the project

"At the moment we have contracted some 200 tank firms, 200 kT tank firm KPRL that’s what we are using at the moment to complement the traditional Kenya pipeline tank firms we are bringing in another 100,000 metric tonnes by the end of this year and there is another 100,000 which is coming on board," he added.

CS Chirchir said that six ships have so far docked at the port of Mombasa expressing optimism in achieving stability in the fuel sector.