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Kenya determined to implement sixteen per cent VAT on fuel

NAIROBI (Xinhua) -- Kenya’s tax collector insisted on Saturday that the 16 percent fuel tax will be implemented despite a vote on Thursday by Parliamentarians to delay its implementation by two years.

The Kenya Revenue Authority (KRA) told members of the public, oil marketers, resellers and retailers that that the value added tax (VAT) will be charged on all petroleum products at a rate of 16 percent on all transactions with effect from Sept. 1.

"The changes are contained in the Finance Act 2013 which extended the exemption for three years.

"Further, the exemption was extended by two more years under the Finance Act 2016.

"Consequently, the VAT charge on petroleum products has now come into effect," the KRA said in a statement issued in Nairobi.

The lawmakers on Thursday voted to delay the introduction of 16 per cent tax on petroleum products to 2020, saying it might have a major impact on the economy.

The legislators said the amendment was meant to cushion Kenyans from the high cost of living as prices of basic commodities including transport fares were to rise.

The tax was first introduced on petrol, diesel, kerosene and jet fuel in the VAT Act of 2013, with a three-year grace period.

In a statement, KRA advised importers, depots, distributors and retailers, including pump stations, to charge, account and submit returns on the same to KRA by 20th of the succeeding month.

"KRA has instituted measures to support oil industry players in complying with the law.

"We have also engaged the Energy Regulatory Commission in order to ensure coordinated action by relevant government agencies," it said.

Industry and consumer lobby groups had warned that the tax would set off sharp price increases and stall overall economic growth.

Motorists had earlier indicated that they would increase fares by 20 percent starting Sept. 1.

The Consumers Federation of Kenya and Kenyan private sector players also raised concerns that an increase in fuel prices would result in a hike on consumer price.

"Fuel products are part of Kenya’s most taxed commodities.

The tax measures are on the back of a push by the International Monetary Fund (IMF) to enable the government to raise more revenue to curb mounting debt following increased domestic and external borrowing.

The measure was among the conditions given to Kenya by IMF in 2015 when it offered the East African nation 1.5 billion U.S. dollars standby loan.

The fuel price hike, therefore, sets up the East African nation’s residents to higher inflation.

Goods and services whose prices are set to rise include electricity, transport, all manufactured products like milk, bread and cooking fat, and all agricultural produce.


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