Treasury rejects calls for a review of fuel taxes, levies » Capital News

NAIROBI, Kenya, Sep 29 – The National Treasury has rejected calls to review taxes and levies with the aim of addressing the current spike on fuel prices.

While presenting submissions to the National Assembly Finance Committee, Principal Secretary for Treasury Julius Muia said such a move will drastically affect revenue collection and defund the national budget.

“Any revising of the taxes will lead to more national borrowing and further affect the formulation of the Division of revenue bill as some of these taxes fund our national budget,” Muia noted.

Muia elaborated that the country will be forced to request for a supplementary budget and opt for more borrowing whose resultant effect will ultimately affect the citizens.

“We have a budget to fund. Our fiscal framework is quite different, we need resources to fund projects like road construction, SGR among other mega developments by the government,” he added.

Muia explained that the current fuel prices were largely as a result of external factors which include low production of fuel globally leading to high prices.

“We don’t charge import duty tax, which acts as a subsidy. Also, some of these taxes are not new, we had the VAT tax since 2018,” he pointed out.

The Treasury Principal Secretary further noted that petroleum products only attract a Value Added Tax of 8 per cent compared to the standard rate of 16 per cent.

Muia further disclosed the National Treasury had raised Sh30 billion since 2018 under the Petroleum Levy Fund.

Lawmakers questioned why the subsidy fund was not activated in time to cushion Kenyans in the month of September from high fuel prices.

In response Muia said the National Treasury had received a request from the Ministry of Petroleum but couldn’t authorize disbursement because the levy fund account was running low.

The PS told the finance committee the petroleum ministry requested for Sh5 billion.

“I have consulted, and I was informed by the team that indeed request for subsidy was made but it did not have the funds. As of September 28, the petroleum levy fund had only Sh3.6 billion,” he said.

The Exchequer also promised to look for a long-term solution to address the issue of fluctuating fuel prices.

“We are engaging in consultations to solve the current crisis. The fuel hike occurred within a short span. We will give a solution that will stabilize the fuel prices,” he said.

“As a nation our economic reserves are not deep, we have to rely on taxes and levies to fund our budget,” PS Muia continued.

The Ministry of Petroleum earlier told the parliamentary team it will seek a to review the prices downward, global crude prices permitting.

Principal Secretary for Petroleum Andrew Kamau stated the review will be done subject to Treasury’s authorization for release of a subsidy petroleum development levy fund.

On Tuesday the Energy Petroleum Regulatory Authority attributed the high fuel prices to subdued production in the global market and increased levies and taxes.