•Consumers had been grappling with costly fuel even before the record-high prices announced two weeks ago after the State started a phased withdrawal of subsidy.
•The move to revert, VAT on oil back to 16 percent saw the band perform above target accruing a surplus of Sh4.8 billion.
Kenya Revenue Authority has recorded a deficit of Sh12.9 billion in tax collections from the oil sector as Kenyans reduced their expenditure on petroleum products.
While it anticipated increased collection, the government appears to have shot itself in the foot in its quest to net more revenues from the high pump prices.
Oil revenues collection by the taxman recorded a performance rate of 84.8 percent in July-September 2023 (or a deficit of Sh12.9 billion against target), and a decline of 8.6 percent over July - September 2022 collections.
“The high fuel prices have caused a decline in fuel revenues. Fuel consumption has actually declined by five percent for diesel and 3.7 percent for petrol” said KRA commissioner general Humphrey Wattanga.
In particular, volumes of diesel, kerosene type jet fuel, illuminating kerosene and other oil products declined by 19.5 per cent, 6.6 percent, 59.7 percent and 24.8 percent. Respectively. However, the volume of petrol grew by 1.6 percent.
KRA says performance for the various the tax categories were affected by a decline in overall oil volumes by 12.4 percent.
This was attributed to a drop in fuel consumption in January - June 2023 due to high pump prices that depressed demand.
Consumption of petrol dropped by 4.9 percent while diesel fell 3.7 percent. The last time such a drop in consumption was noted was during the COVID period in 2020.
“The high fuel landing costs impacted on the eventual retail price. Landing costs are mainly driven by international oil prices that have been on the rise since July 2023, and a continual depreciation of the exchange rate,” added KRA.
Kenya had since 2021 been subsidising pump prices to ease the impact of high global prices of refined fuel, but pressure from the International Monetary Fund and struggles by the Exchequer to compensate oil marketers prompted the withdrawal of the scheme.
However, the move to revert, VAT on oil back to 16 percent saw the band perform above target accruing a surplus of Sh4.8 billion despite overall oil values declining by 28.3 percent.