LEVY REDUCTION

Fuel to be cheaper as MPs seek to lower taxes

Petroleum Development Levy on litre of Super Petrol, Diesel from Sh5.40 to Sh2.90.

In Summary

• The Homa Bay Woman Representative Gladys Wanga-led team has proposed to reduce the Petroleum Development Levy charged on each litre of Super Petrol and Diesel from Sh5.40 to Sh2.90.

• MPs have also recommended that the Value Added Tax charged on petroleum products be reduced by half to four per cent.

An attendant fuelling a car.
An attendant fuelling a car.
Image: FILE

Kenyans are a step away from enjoying lower fuel prices following recommendations by MPs to slash the burdening taxes nearly by half.

The Finance committee of the National Assembly recommended the cuts in a report tabled on Tuesday.

The Homa Bay Woman Representative Gladys Wanga-led team has proposed to reduce the Petroleum Development Levy charged on each litre of Super Petrol and Diesel from Sh5.40 to Sh2.90.

MPs have consequently proposed the revocation of the Petroleum Development Levy Order, 2020 (Legal Notice No. 124 and 174 of 2020) which provides for the levy.

The committee has asked the plenary to amend the Petroleum Development Fund Act, 1991, by providing the Sh2.90 shall be charged to the levy per litre of Super Petrol and Diesel.

MPs have also recommended that the Value Added Tax charged on petroleum products be reduced by half to four per cent.

"Amend the Value Added Tax Act, 2015 to reflect the change in the tax rate for petroleum and petroleum products," the report reads.

The committee has further recommended that the National Treasury prepare Supplementary Estimates to reflect the reduction in revenue occasioned by the changes.

Cooking gas users may also get a reprieve should MPs approve the proposal to reduce VAT to four per cent.

MPs have further recommended that the gross margins of oil marketing companies be reduced to Sh9 from the current Sh12 per litre.

They seek to amend the Energy (Petroleum Pricing) Regulations, 2010 and the Petroleum Development Act, 2019.

Lawmakers have also proposed a waiver on inflation adjustment on fuel for the financial year 2021/22.

"The committee has attached the bill with the amendments to this report," Wanga said.

The National Assembly further wants the Petroleum Fund run by a board.

"We recommend specificity that the Fund shall be used for stabilization of fuel prices and for matters relating to the development of common facilities for distribution or testing oil products," the report reads.

MPs also want a new formula established for the distribution of money from the fund to oil marketing companies.

The committee report followed public participation with various stakeholders including the National Treasury, Energy and Petroleum Regulatory Authority, Petroleum Principal Secretary, and other players in the petroleum industry.

Edited by D Tarus