Kenya declares 50% fuel tax cut

Nairobi, Kenya (PANA) - Kenyan President Uhuru Kenyatta announced a 50% cut in a controversial petroleum tax, which the government was implementing even though Parliament had passed a bill seeking to defer implementation for two years.

On Thursday, President Kenyatta declined to assent to the Finance Bill 2018, which proposed to delay the implementation of the petroleum tax by two more years.

However, in a televised national address on Friday, President Kenyatta said the 16% Value Added Tax (VAT) on petroleum products, which was already under implementation, would be cut to 8% while the government embarks on austerity measures.

"It is clear you are all troubled by the rise in the prices of petroleum products. I understand your concerns," President Kenyatta said when he announced the planned cut on the price of petroleum products.

The Government imposed a 16% tax on petroleum products from 1 Sept under pressure from the International Monetary Fund (IMF), which signed an agreement with the state, seeking an end to VAT exemptions on fuel.

Kenya has been receiving US$989.8 million annually under the Standby arrangement agreed with the IMF to support the shilling from depreciating against the US dollar and other currencies.

Treasury officials maintain it was important that Kenya complies with the IMF conditions in order to continue benefiting from the Standby facility.

According to one official, the Kenyan Shilling remained one of the best performing currencies and missing the IMF facility could lead to a weaker currency which would instead lead to much higher cost of petroleum products.

President Kenyatta said by the decision to cut the tax on petroleum products, the product would be sold at Ksh118 a litre down from the current Ksh127 for gasoline while diesel would retail at Ksh107 from the current Ksh117.

The prices rose by an average of Ksh15 after the Treasury department announced the imposition of the tax.

President Kenyatta is expected to return the Finance Bill 2018 to Parliament where the VAT on fuel products would be revised.

Fuel products were amongst other products which were exempted from VAT taxation in 2013 when President Uhuru Kenyatta came to power, promising to reduce the cost of living.

Kenyatta said the return of the tax was part of reforms which are required to raise additional revenue for government expenditure.

In his speech, President Kenyatta defended the government, saying it used taxes effectively to finance an extensive development agenda.

President Kenyatta mentioned expenses for development, financing of the devolved government structure and an expanded infrastructure portfolio.

Under the current VAT, the government projected to raise US$750 million.

President Kenyatta said after the current VAT taxes, the government would not be able to balance its budgetary constraints.

He announced austerity, measures including reducing training costs, seminars and foreign travel by government in order to match taxes with discipline in public expenditure.
-0- PANA AO/VAO 14Sept2018

14 september 2018 13:22:30

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