KRA Fuel Tax Proposal Signals More Pain For Consumers

Consumers may be headed for tougher times in the coming weeks as the Kenya Revenue Authority (KRA) lines up a tax raise on petrol as part of an annual adjustment on inflation.

A move that comes as the government plans to end fuel subsidies that has prevented prices from rising, a move that promises steep increases in the cost of the product that directly affects the cost of business and living.

KRA has proposed to raise excise taxes on regular and premium fuel, kerosene and industrial diesel which firms rely on for manufacturing of commodities. These fuel categories are expected to have an impact across all sectors of the economy.

“In exercise of the powers conferred by Section 10 of the Excise Duty Act, 2015, the Commissioner-General adjusts for inflation the specific rates of duty set out in the Schedule hereto in accordance with the formula specified in Part 1 of the First Schedule to the Act with effect from the October 1, 2022 and takes into account the average inflation rate for the 2021/2022 financial year of 6.3 percent,” KRA Commissioner-General Githii Mburu stated in the public notice.

The Authority also proposed to raise taxes for imported motorcycles by 6.3 per cent to Sh12,952.83, a move expected to affect the bodaboda sector.

After introducing Sh50 excise duty on Sim cards beginning in the current financial year, which saw Safaricom raise prices from Sh50 to Sh100, KRA has proposed a further 6.3 percent raise in the taxes to Sh53.15, a move that could trigger a further rise on Sim card prices.

The full impact will, however, be felt by consumers when the KRA measures take effect together with the government’s plan to eliminate the fuel subsidy programme launched last year.

The International Monetary Fund’s latest review under its Extended Credit Facility (ECF) and Extended Fund Facility (EFF) with Kenya in July stated Kenya was concluding a fuel pricing mechanism and would constitute a taskforce to “oversee the progressive elimination of the fuel subsidy within the first half of FY 2022/23.”

“The authorities intend to continue gradually realigning domestic to global fuel prices in FY2022/23 so as to eliminate the fuel subsidy by October 2022. They are committed to preserve achievement of FY2022/23 fiscal objectives by aligning the pace of the domestic price adjustment to reduce the cost of subsidies and identifying budgetary offsets through rephasing of domestic, non-priority capital spending to keep the net cost of subsidies within available fiscal space,” the IMF report stated.

If the subsidy is eliminated as planned by the government, fuel prices will be left retailing at highs of Sh215 (super petrol), Sh206 (diesel) and Sh202 (kerosene), according to the Energy and Petroleum Regulatory Authority’s (EPRA) fuel review.