Treasury Principal Secretary Kamau Thugge on Thursday alerted motorists that the price of petrol would shoot up drastically beginning September 2018.
The notice from the PS outlined that the fuel would now cost Ksh130.15 a litre after a new 16 percent value-added tax (VAT) deduction imposed on petroleum products.
He further outlined that the new tax was in line with a promise made to the International Monetary Fund (IMF) two years ago.
The cost of diesel, used mostly by commercial vehicles, will rise by Ksh16.5 to stand at Ksh119.77.
[caption caption="Vehicles ride through a Shell Petrol Station in Nairobi"]
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The increment will also affect kerosene which currently retails at Ksh85 per litre. The new cost will be Ksh99.44, a Ksh13.7 increment.
Dr Thugge emphasised that the new prices would affect motorists countrywide, not only in Nairobi.
Financial projections estimate that the Treasury will earn up to Ksh71 Billion a year with the new taxes.
IMF has been pressing the government to do away with tax exemptions as part of a wider plan to grow revenues and reduce budget deficits.
"The petroleum VAT is intended to boost government revenues to rebalance the public debt, while also providing essential funding for the Big Four socio-economic agenda," George Wachira, the director of Petroleum Focus Consultants stated.
Dr Thugge added, "The ability of the VAT-registered taxpayers to recover input VAT will, therefore, lower their cost base and as such, they should be able to retain reasonable margins on petroleum pump prices.
"Other items that have a direct impact on the livelihoods of ordinary mwananchi remain zero-rated," he explained.
[caption caption="Treasury CS Henry Rotich (R) with PS Kamau Thugge (L) during a past press conference"]
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