(Xinhua) -- Kenyan
manufacturers on Sunday decried a move by the
government to impose a 16 percent value added tax
(VAT) on price of fuel, saying it will increase the
cost of living and slow growth of business in the
The Kenya Association of
Manufacturers (KAM) said the new fuel levy on all
petroleum products—petrol, diesel and kerosene—will
not only negatively affect the industry but also
"With these unfavorable fiscal trends, coupled
with shrinking economic performance, the future is
rather bleak as world oil prices are on increase to
the current average of 68.8 U.S. dollars per barrel
from 50 dollars three years ago," KAM said in a
statement issued in Nairobi.
The government has instructed oil dealers to
start charging VAT on all petroleum products at a
rate of 16 percent on all transactions, starting
from Sept. 1.
This was despite a vote by lawmakers on Thursday
urging a delay in the introduction of 16 percent tax
on petroleum products to 2020, saying it might have
a major impact on the economy.
The legislators said the amendment was meant to
cushion Kenyans from the high cost of living as
prices of basic commodities including transport
fares were to rise.
The tax was first introduced on petrol, diesel,
kerosene and jet fuel in the VAT Act of 2013, with a
three-year grace period.
By charging the 16 percent VAT, the
industrialists said, manufacturers are subject to an
increase in the cost of transportation of raw
materials and finished products, and the increase in
the cost of power, among other overhead costs.
They said the business environment in Kenya is
increasingly becoming cost-disadvantaged and a great
disincentive for foreign direct investment.
"To stay afloat, business will have to make very
hard and drastic decisions of whether to shoulder
the extra cost or pass over the tax burden to
already overburdened consumers in order to meet
their overhead costs," KAM said.
The energy regulator has released new fuel prices
that reflect the 16 percent VAT as ordered by
Treasury Cabinet Secretary Henry Rotich.
Under the new rates, Nairobi motorists will now
pay 1.23 U.S. dollars while those in Mombasa will
pay 1.25 dollars according to a statement from the
Energy Regulatory Commission (ERC) released on
The ERC directive will now see diesel retail at
1.15 dollars while a liter of kerosene will cost
0.97 dollars in Nairobi.
The Association of Matatu Operators, an
association of public passenger vehicle operators,
has already resolved to increase fares starting
The association’s chairperson, Jimal Ibrahim
Hassan, said the move was prompted by the new fuel
levy announced by the ERC.
Matatu fares will now increase by between 0.10
dollars to 0.30 dollars depending on the routes,
Deputy President William Ruto said the government
will work with Parliament to resolve the rising fuel
cost in the country.
Ruto said a balance would be created so as not to
burden Kenyans but also not put a brake to the
government’s development plans, noting that amicable
solution will be found to cushion the public against
any price increases.
"The executive will be meeting parliament so as
to address the concerns raised by Kenyans.
"As a matter of fact, a solution would be
reached," he said on Sunday during a prayer service
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