Fuel prices to soon hit Ksh 200 per litre if parliament approves Ruto’s 16pc VAT
Fuel prices to soon hit Ksh 200 per litre if parliament approves Ruto’s 16pc VAT proposal as contained in the finance bill 2023.
If Parliament approves a proposal by President William Ruto’s administration to double the Value Added Tax (VAT) on petrol in a scheme that might make Kenya have the highest prices in the region, pump prices will almost surpass the Sh200 per litre threshold.
According to a report by Business Daily, a litre of Super will rise by Sh13.51 to Sh196.21 after the additional taxes while diesel will increase by Sh12.40 to Sh180.88 if lawmakers adopted the proposal in the Finance Bill to double VAT to 16 percent.
In total, it is projected that VAT collections will double to an estimated Sh128.98 billion annually or Sh10.7 billion per month.
The collections, however, depend on fuel consumption and global prices of crude oil.
President William Ruto on Sunday defended the proposal to double VAT on fuel on the grounds that Kenyans pay smaller taxes compared to similar economies and that higher levies will provide the much-needed cash to fund development projects such as the building of roads.
“We are not overtaxing ourselves. But to balance it out, as we add eight percent on the same fuel, I have removed the Railway Development Levy (two percent) and Import Declaration Fee (3.5 percent),” Ruto said on Sunday evening in a joint television interview.
He said the government is targeting an extra Sh50 billion from the additional taxes.
The anticipated increase in VAT collections from fuel will come at a cost to homes and businesses that will be grappling with a fresh rise in inflationary pressure.
Consumers are currently paying Sh182.70 per litre of Super, Sh168.40 for diesel while a litre of kerosene costs Sh161.13 — the highest in Kenya since the State started regulating pump prices.
The doubling of VAT will see Kenya’s pump prices pull further clear from the rest of the region, adding pain to consumers given that fuel costs have a significant impact on the cost of goods and services in Kenya’s diesel-run economy.
Kenya has the third costliest fuel in East Africa behind Uganda and Rwanda.
