Fuel Levy in Kenya: BY BUSINESS DAILY

The Treasury will take Sh. 57.57 out of every one litre of super petrol sold in Nairobi beginning this Saturday, marking the coming into effect of the new value added tax (VAT) that raises the cost per litre to Sh131.93.

The new tax, a condition imposed by the International Monetary Fund (IMF), increases to 44 per cent the proportion that the government takes in the cost of one litre of fuel.

The Kenya Private Sector Alliance (Kepsa), Motorists Association of Kenya, and Central Organisation of Trade Unions have all warned Kenyans to brace for steep increases in prices of goods once the new tax comes into effect.

They have also cautioned that VAT on fuel could deal a big blow to overall economic growth, with the possibility of even scuttling the Treasury’s chances of realising the additional Sh70 billion revenue projected to come from the new levy.

The government already imposes a raft of taxes on fuel, including road maintenance levy, petroleum development levy, petroleum regulatory levy and railway development levy.

A litre of diesel and kerosene will cost Sh119.18 and Sh98.54 respectively once the new tax is added.

With VAT being a proportion of the final price of a good or a service, any future fuel price increases will automatically lead to an escalation in local pump costs.

The total tax to be taken by the government on a litre of diesel will amount to Sh46.22 per litre while every litre of kerosene will attract Sh23.37 tax.

This is compared to Sh39.37, Sh29.78 and Sh11.78 currently being paid in taxes for each litre of petrol, diesel and paraffin respectively at the retail level.