Kenya imposes 16% VAT on petroleum products, defying lawmakers

NAIROBI - Kenya's revenue authority imposed a 16 percent value added tax on all petroleum products on Saturday, defying lawmakers who had voted earlier this week to delay the levy for two years due to concerns about the cost of living.

Parliament's decision on Thursday to postpone the introduction of the tax on fuels, which had been pushed back several times previously, was seen as a blow to government efforts to raise state revenues.

But the revenue authority said in a statement it was proceeding based on previously approved budget bills.

"Kenya Revenue Authority informs the general public, oil marketers, resellers and retailers that VAT will be charged on all petroleum products at a rate of 16 percent on all transactions with effect from Sept. 1, 2018," it said.

To become law, the bill on delaying the tax that was passed in parliament still needs approval by President Uhuru Kenyatta.

The Energy Regulatory Commission (ERC) said on Saturday it had recalculated the maximum pump prices that will be in force between 1 and 14 September in order to take into account the new VAT.

"This notwithstanding, if the amendment to the Finance Bill 2018 as passed by the National Assembly is enacted into law, the pump prices shall be re-adjusted accordingly," the ERC said in a statement.

The retail price for petroleum in the capital, Nairobi, will now be quoted at 127.80 Kenyan shillings ($1.27) per litre, while diesel is priced at 115.08 shillings, the regulator said.

Economic analysts said on Thursday that Kenya's fiscal deficit was likely to be higher than projected after parliament rejected most of the tax measures proposed by the government for the 2018 budget.

Kenya's legislature also rejected a "Robin Hood" tax of 0.05 percent on bank transfers of more than 500,000 shillings ($5,000) and an employee contribution scheme towards the national housing development fund.

The planned tax hikes were designed to fund a range of government development goals including universal healthcare and affordable housing.

KRA said it had advised importers, depots, distributors and retailers, including roadside fuel stations, to charge, account and submit returns on a monthly basis.

"KRA has instituted measures to support oil industry players in complying with the law. We have also engaged the Energy Regulatory Commission in order to ensure coordinated action by relevant government agencies," it said.