President Uhuru Kenyatta on Friday recommended a reduction of VAT on Petroleum products to lower the price of fuel.
Kenyatta, during an address to the Nation, stated that he had proposed a 50% reduction in the 16% VAT to 8 per cent.
The changes, he noted once approved shall see fuel prices drop significantly with a litre of Petrol going for Kshs 118 down from Kshs 127.
A litre of diesel shall retail at Kshs 107 from the current Kshs 115.
"The purpose of the new taxes was simple, we have to pay for the new constitutional order and the public service. These cost money. Further delay of the implementation of the tax would compromise our ability to deliver basic services to Kenyans," held the President, defending his decision to reject the Finance Bill 2018.
The Head of State admitted that he was aware of concerns raised by Kenyans over the rise in fuel prices but maintained the taxes were meant to aid running the government under the new constitutional dispensation.
He noted that his administration had allocated over Kshs1 Trillion to County Governments since 2013 and had embarked on a development trajectory without introducing any substantial taxes.
While blaming the rough economic times on the bloated wage bill, the president regretted that the country was facing budget deficits which could not be contained only by the current fuel taxes.
He announced that the situation had prompted the enforcement of major cuts on expenditure across governments in a bid to relieve taxpayers and pledged to step up further the fight against corruption.
"I have proposed a wide range in cuts in spending across all arms of government in areas of hospitality, foreign and domestic travel, training and seminars... We still face a gap in our finances. This measure alone will not suffice to finance our budget," stated Kenyatta.
The President appealed for an immediate drop in commodity prices observing it is expected that traders change prices to reflect the proposed drop in fuel prices and lowered tax on petroleum products.
"Just as business owners took the new VAT rates as an opportunity to increase the cost of goods, I expect them not to take advantage of Kenyans and lower the prices commensurate, without any delay," stated President Kenyatta.
