International Monetary Fund (IMF) now wants the Kenyan government to double the value-added tax (VAT) on all petroleum products, in a bid to meet its financial obligations.
This comes at a time the government is facing an uproar from the citizens for “overborrowing”, putting the country in a shaky financial position.
Currently, the government charges 8 percent for VAT, but IMF wants the charge to be at par with other products at 16 percent.
In the current pricing, Kenyans pay over Ksh57.33 in taxes and levies for a litre of Petrol while the product costs Ksh49.84.
For Diesel, Kenyans pay Ksh45.47 in levies and taxes against a product cost of Ks46.82. Taxes and levies for Kerosene amount to Ksh39.55 per litre.
Excise duty accounts for Ksh21.95 per litre while road maintenance levy stands at Ksh18, VAT Ksh9.10 and the petroleum development levy Ksh5.40.
The government also charges railway development levy, anti-adulteration levy, merchant shipping levy and the import declaration fee.
Here is a breakdown of fuel costs in Kenya:-
The 16 percent VAT was originally included in a law passed in 2013, but was postponed several times after protests from Kenyans.
In its advisory to the government after approving a Ksh255 billion loan, IMF cited oversupply and volatility in the oil market as a shock absorber.
“If needed to meet fiscal objectives, capitalise on lower fuel prices by aligning fuel VAT to the standard rate. Oversupply and volatility in the oil market would be a positive shock for Kenya, easing potential external balance pressures from other sources,” noted IMF.