Customers are currently paying up to Sh79 in taxes per litre of fuel, highlighting the impact of the surcharges in driving up the price of petroleum and resulting in Sh29.2 billion in monthly revenue for the Kenya Revenue Authority (KRA) from sales of diesel, petrol, and kerosene.
According to the most recent price review, every litre of petrol costs Sh79.31 in taxes and levies, with diesel, the most used fuel in the Kenyan economy, costing Sh67.35. Each litre of kerosene costs Sh62.81 in taxes and charges.
The KRA would raise an estimated Sh5.79 billion more per month from the three fuels due to the greater composition of taxes and levies compared to the Sh23.38 billion raised each month since September 2017 before the value-added tax was doubled.
Due to the rise in the landed cost of the good and the doubling of VAT two months ago, taxes and levies as a percentage of the price of a litre of fuel have increased dramatically.
Taxes and levies accounted for Sh64.14 per litre of super gasoline, Sh53.39 per litre of diesel, and Sh46.81 per litre of kerosene in the monthly pricing review up to October 14 of last year.
Despite growing popular resentment over the high costs and its knock-on consequences on the cost of living, President William Ruto has asserted in the past that the government does not overtax fuel.
The largest tax on fuel, after VAT, is excise tax. The levies include import declaration fees, petroleum regulation fees, railway development fees, anti-adulteration fees, and merchant shipping fees. The levies on roads upkeep and petroleum development are also included.
With the passage of the Finance Act 2023, which was adopted by the legislature, the VAT was doubled, resulting in high costs that soared even higher after the government stopped stabilizing fuel prices to protect consumers.
Dr. Ruto suggested that the elimination of the import declaration fee (3.5%) and the railway development levy (2% each) will offset the increase in VAT.
Based on the Energy and Petroleum Regulatory Authority’s (Epra) estimates of petroleum use, the KRA collected Sh27.96 billion in taxes and levies last month and Sh23.38 billion in September of last year.
The Finance Committee of Parliament’s 2021 session recommended lowering the eight per cent VAT on petroleum items to four per cent.
Additionally, the committee has suggested that the petroleum development charge be decreased from Sh5.40 to Sh2.50 per litre.
In order to emphasize the importance of fuel goods in the KRA’s tax revenues, the Treasury has consistently rejected legislative efforts to lower the levies and taxes on them.
Beginning on July 1 of this year, the VAT was doubled, which sparked a rise in gas prices and increased tax revenue for the government.
Similar to other non-oil-producing countries, Kenya is struggling with a rise in crude oil prices on a worldwide scale. The issue has been made worse by a succession of taxes and a decision to withdraw the stabilization fund in response to pressure from the International Monetary Fund (IMF).
The closure of many refineries, increasing demand from Europe ahead of the winter season, and output cuts by big producers like Saudi Arabia have all contributed to an increase in refined fuel prices during the previous three months.
The IMF also prevailed after the government gave in to pressure and turned down requests to stabilize pump prices to protect Kenyans. The IMF is one of Kenya’s major sources of finance.
The closure of many refineries, increasing demand from Europe ahead of the winter season, and output cuts by big producers like Saudi Arabia have all contributed to an increase in refined fuel prices during the previous three months.
The IMF also prevailed after the government gave in to pressure and turned down requests to stabilize pump prices to protect Kenyans. The IMF is one of Kenya’s major sources of finance.