Home Business Budget losers: Kenyans face costly fuel as Treasury hikes VAT to 16pc

Budget losers: Kenyans face costly fuel as Treasury hikes VAT to 16pc

The National Treasury and Economic Planning has proposed to increase Value Added Tax on petroleum products from the current 8pc to 16pc.

The proposal which seeks to remove the preferential rate now sets up consumers who have been forced to dig deeper into their pockets to even more elevated prices beginning July 1, 2023.

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According to the National Treasury and Economic Planning Prof. Njuguna Ndung’u, the move has been necessitated by the buildup of untaxed credit among fuel importers which in the end deny government the much needed revenue.

“The continued practice by government to subsidize cost of fuel by levying a preferential rate of 8pc distorts market yet the economy should be operating on the principles of demand and supply. Mr Speaker in this respect, I propose to the National Assembly to amend the VAT Act to remove the preferential rate on petroleum products so that the products will be subject to the standard VAT at 16pc,” said Prof. Ndung’u.

The proposals to hike VAT on petroleum products comes despite rising opposing views from members of the public and other stakeholders.

In the past, the government had been forced to spend more than Ksh 60 billion on fuel subsidy programme, a move President Ruto said was unattainable.

“if the anomaly is not corrected at the earliest, the build-up of credits will continue to increase and should the Government seek to charge VAT at the standard rate in the future, it would take years for the Government to collect the much-needed revenues from this sector since the credits have to be exhausted before the businesses start paying VAT,” he added.

In the last fuel review published Wednesday by the Energy and Petroleum Regulatory Authority (EPRA), a litre of super petrol was reduced by KSH 0.66, diesel by Ksh 1.12 as a litre of kerosene shot up Ksh 0.35.

Those who also stand to lose in FY2023/24 budget are winners in betting, gaming, prize competition and lotteries who will have to pay excise duty at the rate of 12.5pc from 7.5pc on their winnings, a move treasury expects to discourage gambling activities.

Treasury in a move to protect and spur local fish production has slapped fish importers with an excise duty tax on imported fish. Importers will now pay excise duty at Ksh 100,000 per metric tonne or 10pc of the excisable value, whichever is higher.

Manufacturers of powdered juices who have not been subjected to excise duty tax will now be charged excise duty at rate of Ksh 25 per kilogram.

Treasury has also proposed the introduction of excise duty on imported sugar at the rate of Ksh 5 per kilogram excluding the sugar imported or purchased locally by registered pharmaceutical manufacturers for use in the manufacture of pharmaceutical products.

In a move to discourage alcoholism, betting, gaming, lottery and prize competition, Treasury is also proposing to introduce excise duty at the rate of 15pc of the excisable value on fees charged on the advertisements by all televisions, print media, billboards, and radio stations in promoting the activities.

Cement manufacturers can now breathe a sigh of relief after the government moved in to shield local industry from stiff competition by cement importers who will now pay higher tax on the product.

“To protect them from unfair competition and promote this industry, I propose to the National Assembly to introduce excise duty on imported cement at a rate of 10pc of the excisable value or Ksh 1.50 per kilogram whichever is higher,” said the CS.

Other losers include furniture importers who excise duty at the rate of 30pc of the customs value excluding the furniture originating from EAC countries.

Importers of paints, varnishes, and lacquers will also be charged excise duty at the rate of 15pc of the excisable value on the imports.

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