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MPs in scheme to bring down petroleum costs

Wednesday, September 22nd, 2021 02:30 | By
The National Assembly wants to amend law on taxation of fuel. Photo/File

Parliament yesterday kick-started the process to lower the spiralling fuel prices that could see MPs amend the law to lower taxes on petrol.

National Assembly Speaker Justin Muturi approved a petition filed by an MP and two citizens seeking to abolish the current tax regime on fuel.

In the petition, Matungulu MP Stephen Mule and citizens Antony Manyara and John Wangai are calling for “urgent repeal of Section 13 of the Finance Act, 2018 in order to address the drastic increase in prices of petroleum and petroleum products by abolishing the current 8 per cent Value Added Tax.”

The petitioners decried the passage of section 13 of the Finance Act, 2018 which amended section 5(2) of the Value Added Tax, 2013 that introduced a Value Added Tax of 8 per cent on petroleum and petroleum products that were previously exempted from the tax.

The petitioners argue the taxation rate was pegged at the taxable value of petroleum and petroleum products exclusive of excise duty, fees and other charges.

They say that all taxpayers and consumers of petroleum and petroleum products have been adversely affected by the law they term as draconian.

“The Petitioners seek the intervention of this House to consider repealing Section 13 of the Finance Act, 2018 in order to address the sharp increase in prices of petroleum and petroleum products through abolition of the currently prescribed 8% Value Added Tax,” Muturi told members.

This, he said, was in view of its overreaching and substantial impact on taxpayers and consumers of the said products, which the petitioners have listed as petroleum oils,  bituminous minerals, motor vehicle fuel, spirits, kerosene-based jet fuel, illuminating kerosene, and natural gas in gaseous state.

Muturi said he had received similar petitions and requests for Adjournment Motions from Dagoretti North MP Simba Arati and Nominated MP Wilson Sossion, seeking adjournment of the House so as to deliberate on the matter.

“I have determined that the best avenue for resolving the issue at hand is not a Motion but rather legislation, and it is on the same basis that I declined to approve Statements and Questions from several other Members on the matter,” Muturi said.

The Speaker committed the petitions to the Departmental Committee on Finance and National Planning for consideration and directed that the matter be heard and determined in the next two weeks.

Other reasons 

In addressing the concerns and prayers of the Petitioners, Muturi told the committee to table its report within 14 days in view of the urgency of the matter and in consideration of the effects it has on the populace, notwithstanding the sixty-day period under Standing Orders.

The committee chaired by Gladys Wanga was directed to attach a draft Bill to the report, for the Speaker’s approval for publication, proposing legislative interventions as sought by the Petitioners.

Wanga’s committee was also tasked to undertake inquiry to confirm whether there are other reasons, beyond taxation, leading to the drastic rise in the cost of petroleum and petroleum products with a view to proposing administrative and legislative measures for addressing the causes.

MPs blamed overtaxing on the current fuel prices and called on the committee to expedite the inquiry and rule that the taxes be reviewed.

Bonchari MP Pavel Oimeke said for the issue of fuel prices to be addressed, the powers given to the Treasury Cabinet Secretary must be reviewed as they gave him authority to review taxes at will.

“The process as it is currently is wrong. The CS has been given too much power to regulate the prices,” said Oimeke who served as the Director General of the Energy and Petroleum Regulatory Authority.

He said the framework of levies and taxes was wrong as it gives immense powers to the CS. For instance, the CS decided two years ago to raise the Petroleum Development Levy from 40 cents to Sh5.40.

“The committee needs to look into the framework and specifics that make the prices go up every now and then,” Oimeke said.

Finance Bill 

Garrisa Township MP Aden Duale said it was sad that taxes on petrol had shot up to Sh78 per litre.

“We must rise to the occasion as lawmakers, this is our time to show direction by reviewing the taxation regime which has caused the unbearable fuel prices,” Duale said.

Interestingly, Duale, who was Leader of Majority when the tax was retained in the Finance Bill, was at the forefront rallying MPs to pass the law so that Treasury would not suffer a budget deficit.

He is quoted:“I want to speak to both the Yes and No camps that we handle the matter in the interests of Kenyans.

It is good for the House to know that at 16 per cent the Treasury was to collect Sh35 billion and it was already factored into the budget.”

Backed by Leader of Minority John Mbadi, Duale led a walkout from the House occasioning a lack of quorum ensuring the No side could not carry the day.

Yesterday, Leader of Majority Amos Kimunya asked the committee to consider the gaps which come up as a result of reviewed taxation.

For instance, VAT on fuel, which is projected to generate Sh29 billion and has already been budgeted by Parliament, will have to be filled so as to affect the implementation of some of the planned programmes.

“With the change in VAT the committee must look into other items that can be taxed to fill the gap left by the removal of the Sh29 billion,” Kimunya said.

According to Kimunya, the rise in the price of fuel was inevitable following some unprecedented changes in the market like an increase in the price per barrel which fell to almost Sh9 per barrel last year to now $73.

“The decline in our exchange rate from 101 to 111 has caused the landing cost before imposing duties to stand at Sh86,” Kimunya said.

However, according to the latest Epra report the landed cost of Super petrol on August 21 was Sh60.35, Diesel Sh53.88 and that of Kerosene was Sh54.44. The taxes they attracted was Sh58.81, Sh46.46 and Sh41.14 respectively. The extra costs were margins for the sellers.

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