NAIROBI, Kenya, September 29 – The National Treasury has rejected calls to review taxes and levies in an attempt to deal with the current soaring fuel prices.
When presenting the bids to the National Assembly’s finance committee, Principal Treasury Secretary Julius Muia said such a move would significantly affect revenue collection and fund the national budget.
“Any tax revisions will result in more domestic borrowing and further affect the formulation of the Revenue Division Bill, as some of these taxes fund our national budget,” Muia noted.
Muia said the country will be forced to seek additional budget and opt for more borrowing, the resulting effect of which will ultimately affect citizens.
“We have a budget to finance. Our fiscal framework is quite different, we need resources to finance projects such as road construction, SGR, among other government mega-developments, ”he added.
Muia explained that current fuel prices are largely due to external factors, including low fuel production globally, resulting in high prices.
“We don’t charge import customs tax, which acts as a subsidy. In addition, some of these taxes are not new, we had the VAT tax since 2018 ”, he stressed.
The Principal Secretary of the Treasury further noted that petroleum products were only subject to a value-added tax of 8 percent compared to the standard rate of 16 percent.
Muia further revealed that the National Treasury has raised 30 billion shillings since 2018 under the Petroleum Levy Fund.
Lawmakers wondered why the grant fund was not activated in time to protect Kenyans in September from high fuel prices.
In response, Muia said the National Treasury received a request from the Petroleum Ministry but could not authorize the disbursement because the levy fund account was nearly depleted.
The PS told the finance committee that the Oil Ministry requested 5 billion shillings.
“I consulted, and I was informed by the team that indeed a grant request had been made but that it did not have the funds. As of September 28, the oil levy fund only had 3.6 billion shillings, ”he said.
The Exchequer also pledged to seek a long-term solution to the problem of fluctuating fuel prices.
“We are conducting consultations to resolve the current crisis. The fuel surge occurred within a short period of time. We will provide a solution that will stabilize fuel prices, ”he said.
“As a nation, our economic reserves are not important, we have to rely on taxes to finance our budget,” continued PS Muia.
The Oil Ministry earlier told the parliamentary team that it would seek to revise prices downward, if world crude prices permit.
Principal Petroleum Secretary Andrew Kamau said the review will be carried out subject to Treasury authorization for the release of an oil development royalty fund.
On Tuesday, the Energy Petroleum Regulatory Authority attributed the high fuel prices to low production in the world market and increased levies and taxes.