MPs in race to review fuel tax after public outcry

Speaker Justin Muturi direct Finance committee to report to House in 14 days

In Summary

•Fuel prices shot drastically after cash-strapped Exchequer removed a Sh7.10 subsidy on super petrol, Sh9.89 on diesel, and Sh11.36 on Kerosene.

The National Assembly Finance Committee has 14 days to consider a petition challenging the fuel prices blamed for the significant increase in the cost of living in the country.

Speaker Justin Muturi directed the team chaired by Homa Bay Woman MP Gladys Wanga to attach a draft bill to the report proposing legislative interventions to reverse the situation.

The speaker has further directed the committee to undertake a general and targeted inquiry to confirm whether there could be other reasons beyond taxation causing the fuel rise.

“The inquiry should be with a view to proposing administrative and legislative measures for addressing those causes,” Muturi said.

The speaker made the directive following a petition by Antony Manyara and John Wangai seeking an urgent repeal of Section 13 of the Finance Act, 2018.

The duo wants MPs to abolish the 8 per cent Value Added Tax, which staged an increase in the prices of petroleum products.

“The petitioners decry passage of section 13 of the Finance Act, 2018 which amended section 5(2) of the Value Added Tax, 2013 that introduced a Value Added Tax of 8 per cent on petroleum and petroleum products which had previously been tax-exempt,” Muturi told the House on Tuesday.

A similar petition was filed by Matungulu MP Stephen Muli while Dagoretti North MP Simba Arati and his Nominated counterpart Wilson Sossion sought an adjournment to discuss the matter as a special motion.

“I have determined that the best avenue for resolving the issue at hand is not a motion but rather legislation,” the speaker said.

He added, “You will all agree that the solution to the matter at hand lies in addressing taxation and related measures, and, therefore, it is only prudent that we consolidate the efforts therein in one organ of this House.”

The matter has elicited heated politics as MPs engaged in a blame game on who was responsible for the debilitating tax regime.

“You are right to direct this matter to the Finance committee. The matter has got to do with the pricing. I urge the committee to answer to some issues contributing to the high prices,” Suba South MP and Minority Leader John Mbadi said.

His Mvita counterpart Abdulswamad Nassir said there was the need to do away with some levies such as fuel adulteration levy, adding that the petroleum development levy fund is put to good use.

The MP said he had raised the matter when fuel prices hit Sh122 in March adding that the fuel prices would have been contained by that time.

“Every single member applauded in support because this is something that has a ripple effect on the economy,” he said.

The MP wondered why the committee on Delegated Legislation and Energy Committee was yet to issue a report on the same.

“Seven months down the line, we have not seen the report. Let us not call a spade a big spoon,” Nassir said.

Majority leader Amos Kimunya blamed the situation on the global increase in fuel prices and vouched for Kenyans to consider using alternative sources of energy to substitute fuel.

“The issue would be what would be the impact of changing VAT. We are looking at losing Sh29 billion when the VAT is removed,” Kimunya said.

“The only reason that fuel did not go up was that Petroleum Development Levy Fund was used to cushion the taxpayers. There could be the possibility of reintroducing the subsidy to cushion Kenyans on a short-term basis.”

Fuel prices shot in the latest review subjecting Kenyans to higher costs of basic commodities, travel, electricity, and liquefied petroleum gas.

MPs resumed sittings on Tuesday amid hopes by Kenyans that they will reverse the situation and give taxpayers relief in the face of the ravaging effects of Covid19 on businesses.

“The high prices have been effected at a time when Kenyans are grappling with adverse effects of the Covid19 pandemic that have dented their earnings,” Arati said.

He added, “This will also have a ripple effect on critical sectors of the economy. The hike has also rekindled debate on the high taxation of petroleum products.”

Observers, however, say that the changes would depend on the goodwill of the Executive which has been keen on charging the tax to avert defaulting on debt repayment.

Fuel prices shot drastically after cash-strapped Exchequer removed a Sh7.10 subsidy on super petrol, Sh9.89 on diesel, and Sh11.36 on Kerosene.