President Ruto: Why we are increasing VAT on fuel

President William Ruto on Sunday defended his government’s decision to increase VAT on petroleum products from eight per cent to 16 per cent.

In a joint media interview from State House, Nairobi, Ruto, who had on the presidential campaign trail last year noted a “need to rethink” VAT on fuel, said the move is to seal loopholes rogue players use and give the government more revenue.

According to the Head of State, his government in August last year found a 900 billion-shillings commitment on Kenyan roads which they have tried to cut down by stopping some of the roads that had not been constructed.

“But we still remain with about close to 600 billion shillings that we have to manage,” the president said, “If I have to complete these roads, I need extra money to do it so that whole equation changed. So I have said we increase the VAT by 8 per cent because having differential rates of 8 and 16 per cent poses an integrity problem; people use it as a problem to manipulate numbers.”

President Ruto said the suggestion to hike VAT on petroleum products by his economic advisory team will give the government Ksh. 50 billion.

“This 8 per cent we are adding will give us about 50 billion shillings and begin to deal with the problem of roads in our country, but to balance it out, I have removed on the same fuel, 3.5 per cent road development levy, 2 per cent of IDF, and removed 8 per cent VAT on gas,” he said.

“I have removed 14 other taxes to try and even so that we can have a balanced budget.”

To have a ‘balanced budget’, the president said he has cancelled the borrowing of 300 billion shillings by his predecessor Uhuru Kenyatta’s government, that “could have taken the country down the cliff.”

“I had to stop many of the subsidies that were being dished left, right and centre and make many changes to reorganise the whole budget because we found a country headed and sliding into bankruptcy,” Ruto said.

At the same time, President Ruto shut down claims of an extra hand of pressure on the Kenyan government by the International Monetary Fund (IMF) in order to repay the debt it owes the global lender.

“The IMF does not run the government of Kenya; I do. IMF does not make decisions on behalf of the government of Kenya; I do. IMF are our partner; they work with us on our priorities and proposals. They support us and give advice where they can but ultimately, we make the decisions ourselves,” Ruto said.

“I can stand up to any pressure, I make the right decisions for our country.”

Last month, Central Bank of Kenya governor Patrick Njoroge said Kenya was expecting at least Ksh.161 billion ($1.2 billion) in financing inflows between April and May and is in talks for new funding from the IMF to support falling forex reserves.