Senators set tempo for Ruto, Raila clash over fuel levy

Senators have set the pace for a bitter clash between President William Ruto and opposition chief Raila Odinga over the proposed increase of fuel levy.

Allies of the two political nemeses took on each other on the floor of the Senate over the levy that has triggered a massive public uproar.

In the Finance Bill 2023, the government has proposed to increase the VAT on petroleum from the current eight per cent to 16 in a bid to net at least Sh50 billion to fund its operations.

While Ruto’s troops threw their weight behind the increment, Raila lieutenants have vehemently opposed it, arguing that it will worsen the already bad economy.

The camps jumped on a statement sought by Nominated Senator Hamida Kibwana (ODM) on the rationale behind the government’s push for the levy.

Constitutionally, the Senate has no mandate to legislate on money bills – one that imposes taxes and levies.

It’s a preserve of the National Assembly.

Kibwana also sought answers from the government through the House’s Finance Committee regarding withholding Value Added Tax obligations on petroleum products and its impact on businesses.

“The committee should state the rationale for the current withholding VAT obligation on petroleum products, stating its impact on the profitability and sustainability of businesses in the petroleum sector,” Kibwana said.

Speaker Amason Kingi cleared Kibwana’s statement and ordered the Finance committee chaired by Mandera Senator Ali Roba to summon Treasury CS and other relevant stakeholders to give answers. 

Nyamira Senator Okongó Omogeni, a close ally of Raila, said that an increase in the levy on fuel will have a trickle-down effect that will hit hard the poor

“We all know that when you raise VAT on fuel from the current 8 to 16 per cent, there will be a trickle effect to the common citizen, the so-called hustlers,” Omogeni said.

“It is sad that we are abandoning hustlers hardly before our first anniversary in office as the United Democratic Alliance (UDA) administration.

"The issue of taxation is not something to joke with. Poor taxation measures have brought down governments. We must be conscious about the people who vote for us who are also poor."

But Nandi Senator Samson Cherargei, a staunch supporter of President Ruto, defended the levy, stating the government badly needs the cash to pay huge debt and meet other obligations.

“There are two issues. It is either we tax or borrow. The budget ceiling is around Sh9.4 trillion. We are looking at a budget of Sh3.6 trillion,” he said.

The vocal lawmaker held that the country’s public debt has become unsustainable, thus the need for more cash to offset the debt and cut on more borrowing.

Cherargei claimed that the country is crippled economically by the billions that the former government spent on fuel subsidy that ‘never worked.’

“The international economists and International Monetary Fund (IMF) have said that we cannot live on subsidies.”

“We need to raise our local revenue. If we do not raise it, then we borrow more. If we borrow more, the country will be sold casually like second-hand clothes in some markets.”

In her statement, Kibwana wants the committee to provide an analysis of the impact of the two per cent withholding VAT on the petroleum industry, in terms of job losses and negative effects on the economy.

“The committee should state how changes made by the Finance Act (2021) to the Tax Procedures Act (2015) affected the petroleum industries' ability to seek exemptions from withholding VAT obligations,” she said.

In addition, Kibwana in her statement wants the panel to state interventions put in place to ensure that the Finance Bill (2023) includes an amendment to exempt petroleum products from withholding VAT obligations.

(Edited by Tabnacha O)