Kenya: Government fiscal boom as fuel price hike earns KRA an additional 1.5 billion shillings

Whenever there is an increase in the price of fuel, it is the tax authorities who smile the most.

Indeed, since the fuel price formula caps the maximum profits that oil traders and other actors in the sector realize regardless of the price per liter, the tax authorities collect more taxes on the higher prices of fuel than on the higher fuel prices. cheaper fuel.

Rising fuel prices last week imposed more taxes on the government on every liter of fuel bought at the pump, making it the biggest beneficiary of the fuel price revision.

So the Kenya Revenue Authority (KRA) will make more money on every liter of fuel you buy today than it did a year ago, even without an increase in the tax rate.

A year-long analysis of the price of fuel shows that in September of last year, the tax authorities collected a total of 54.26 Sh as taxes and levies on each liter of gasoline sold, 43.38 Sh on diesel and 37.27 Sh on kerosene.

This amount has now increased from 7 to 10 per cent, without the government having to increase the tax rate. This translates into an additional 4.5 shillings per liter of gasoline sold, 3.08 shillings per liter of diesel and 3.87 shillings per liter of kerosene.


To put this into perspective, in September of last year, a liter of fuel was subject to value added tax (VAT) of 7.81 shillings per liter of gasoline, 7 shillings for diesel and 6.16 shillings. shillings for kerosene.

KRA now collects 9.98 Sh per liter of gasoline in VAT, 8.56 Sh per liter of diesel and 8.21 Sh per liter of kerosene.

Read: Arati calls for suspension of VAT law to cut fuel costs

With Kenya consuming more than half a billion liters of fuel each month, that translates into at least 1.5 billion shillings more in taxes each month.

Kenya imposes at least nine different taxes on fuel, which ends up doubling the price of the product at the pump.

-Some taxes are excise duty, road maintenance tax, petroleum development tax, petroleum regulatory tax and railway development tax.

The others are anti-forgery tax, merchant shipping tax, import declaration tax and VAT.

As the taxman earns more money, oil marketing companies will keep their margins at 12.39 shillings per liter of gasoline, 12.36 shillings per liter of diesel and 12.36 shillings per liter of kerosene. This is the same amount they earned last year.

The Energy and Petroleum Regulatory Authority (Epra) last week triggered an increase in fuel prices and the cost of living after it failed to receive funds from the stabilization fund to amortize the consumers.

This saw the price of super gasoline jump by 7.58 shillings, diesel by 7.94 shillings and kerosene by 12.97 shillings.

Super gasoline now sells for 134.72 shillings per liter in Nairobi, diesel at 115.60 shillings, while a liter of kerosene now costs 110.82 shillings.

Cost of life

It comes at a time when consumers are preparing to dig deeper into the pocket for everyday items.

Current fuel prices have reignited a national debate on the cost of living.

MPs, who ironically approved fuel taxes in addition to being the ones making regulations that guide the industry, are now protesting current prices.

The Kenya Manufacturers Association (KAM) says taxes and levies make up about 46 percent of retail fuel prices, with excise tax making up the largest part.

“With pump prices already at historic highs, the proposed annual inflation adjustment on fuel excise taxes will worsen the difficult situation facing the manufacturing industry in Kenya,” said Ms. Phyllis Wakiaga, CEO of KAM, in a statement.

Impact on consumers

He also added that the proposed inflation adjustments on excisable products will have an impact on consumers as prices will rise to unsustainable levels.

This would force manufacturers to restructure or downsize their businesses to stay afloat, leading to massive job losses along the vast supply chains they support.

“Currently, excise rates are five times higher in Kenya than in Tanzania and Uganda.

“As a result, excisable products in Kenya will continue to be uncompetitive, with higher levels of illicit trade depriving governments of revenue through tax evasion,” KAM said.

About Natalee Broderick

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