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Uhuru returns to a storm over contentious fuel tax

President Uhuru Kenyatta returns home from China to a storm over fuel levy which has started having widespread impact on various key sectors of the economy. Indications are the price of maize flour is set increase in a move that will spike the cost of living further.

A statement by Cereal Millers Association (CMA) yesterday warned that the 16 per cent Value Added Tax (VAT) levied on petroleum products will lead to a surge in the cost of production to warrant an increase the price of maize and wheat flour.

The millers also said an earlier move by National Treasury to change the status of wheat and maize flour to exempt from zero-rated also meant millers can no longer claim VAT on production.

The review on fuel was activated after Kenya Revenue Authority’s demand on dealers to levy VAT on petroleum products led to widespread condemnation countrywide.

Changes which were made despite Parliament voting to delay the introduction of 16 per cent tax on petroleum products by two more years led to an immediate price surge in some sectors immediately Energy Regulatory Commission adjusted fuel prices on Saturday.

Fare went up by close to 20 per cent in most parts of the country while independent dealers refused to transport the commodity to petrol stations leading to fuel shortages. Striking oil dealers have now parked their vehicles at various Kenya Pipeline Company depots in Nakuru, Eldoret and Nairobi demanding that the new law levy be reversed.

Even as the increasing cost of commodities starts to bite, Kenya Independent Petroleum Dealers Association (KIPEDA) said they would be on strike until the government scraps the tax. Reacting to the ongoing fuel crisis, Musalia Mudavadi said that while it obvious that Kenyans rank among the most heavily taxed people in the world amid a new tax regime, it is unfortunate that most of the money is gobbled up by corruption.

Citing wrong calculations to the various costs that determine the cost of fuel throughout the country, the Opposition leader called for action on corrupt officials who spike the cost of fuel.

“Accordingly, we demand that investigative institutions must follow a number of very disturbing leads to establish why Kenyans are paying dearly for petroleum products and bring the culprits to book,” he said.

As Central Organisation of Trade Unions moves to court seeking orders suspending the implementation of 16 pc Value Added Tax on Petroleum products, it has emerged that Treasury has been asked to review the levies further by the Ministry of Energy and Petroleum.

The note which says disputes the estimated costs issued by the Energy Regulatory Commission (ERC) could actually see a further increase in the cost of petroleum products.

“The purpose of this letter, therefore, is to request the National Treasury to waive on the provisions of computation of VAT on levies in the interim pending subsequent review of the retail pump prices,” says the letter by Public Secretary Andrew Kamau.

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