Fred Aminga @faminga
Despite MPs vote against the implementation of 16 per cent VAT on petroleum products, Treasury could still surprise Kenyans in a move that could increase the cost of petrol above Sh130.
According to Francis Kamau, a tax partner at Ernst and Young, Treasury Cabinet Secretary can still leverage on the Provisional Collection of Taxes and Duties Act to collect taxes for a limited period.
Kamau said that leveraging on an Act of Parliament that gives statutory effect “for limited periods to orders of the Minister imposing any new tax or duty or rate of tax or duty, or creating any new allowance, or altering or removing any existing tax or duty, or any such rate or allowance”.
Therefore in the exercise of these powers conferred by Section 2 of the Provisional Collection of Taxes and Duties Act, the Cabinet Secretary for the National Treasury can order that all provisions of the Bill relating to taxes or duties shall have effect as though the Bill were passed into law.
“This can go on up to six months until the president signs the Act into law,” he said.
This could pour cold water on countrywide celebrations that followed a Parliamentary session on an amendment to the Finance Bill, 2018, where members of Parliament voted for the postponing of the implementation of 16 per cent VAT.
“The House has this afternoon approved an amendment to Clause18 of the Finance Bill, 2018, sponsored by Minority Whip, Junet Mohammed, suspending the implementation of 16 per cent VAT on fuel, which was to take effect on 1st Sept 2018, for a period of 2 years, citing the high cost of living,” read a statement from the National Assembly on Wednesday.
During the session, National Assembly Minority leader John Mbadi said implementing the tax would have increased the price of commodities by at least than 10 per cent.
“The transport cost would rise by over 20 per cent. This is an amendment this House must support,” he said.
Having been suspended for two years, the 16 per cent value-added tax (VAT) on petroleum products will increase. In the new plan, petrol prices will shoot to more than Sh131.93 in Nairobi, while diesel and kerosene will rise from the current Sh102.74, and Sh84.95 per litre, to highs of Sh119.38, and Sh98.54, respectively.
COTU Secretary General Francis Atwoli and Matatu Owners Association chairman Simon Kimutai have warned against the move saying it will spike the cost of living.
“Additional fares are painful to commuters but the increase in fare prices has to take effect because taxation of fuel translates to an added cost to public service vehicles operators,” Kimutai said.
The Energy Regulatory Commission (ERC), which is expected to ratify the deal, had distanced itself from the VAT issue saying only Treasury was mandated to impose levies and taxes.
“The Commission is still awaiting official communication with regards to the 16 per cent VAT,” said ERC in a statement.
The VAT was introduced after the International Monetary Fund (IMF) issued a condition for it to be effected in 2015, so as to give Kenya Sh150b standby loan, which was suspended but was to be reviewed in 2018 on condition that the VAT on fuel is actualised.