The Motorists Association of Kenya (MAK) on Sunday, May 7, decried a fuel Value Added Tax (VAT) hike by President William Ruto’s administration.
The VAT was revised from 8 per cent to 16 per cent for the financial year 2022/2023 according to MAK which sparked fears of matatu fares going up.
Speaking to Kenyans.co.ke, Matatu Welfare Association (MWA) Chairman Dickson Mbugua revealed that despite the VAT hike, a decision to increase fare prices had not been agreed upon.
“Increasing fare is something we have tried in the past and it did not work.
“Kenyans are battling a high cost of living and they do not have the capacity to pay in case we decided to hike the prices,” he told Kenyans.co.ke.
On what Matatu owners would do in the face of the increased hike, Mbugua remarked, “We will continue lobbying the government to reconsider as well as look for other incentives that will enable us to continue operating profitably.”
The Finance Bill, 2023, proposed to amend section 5 of the VAT Act on petroleum products to increase the levy to 16 per cent from 8 per cent.
Tax experts explained that this would have a significant ripple effect on the cost of living taking into consideration Kenya's dependency on fossil fuel and the already high global oil prices.
"The proposed incremental VAT rate of 8 per cent will result in an additional Ksh12 on petrol, diesel and Kerosene," Joe Mwaniki a tax expert noted.
MAK had in its statement stated that Ruto’s government had gone against protection instituted by former President Uhuru Kenyatta.
“We are disappointed to report that the fuel VAT the association protested about forcing the former regime to set it at 8 per cent has been arbitrarily adjusted to 16 per cent in this year's Budget.
“This is in line with the International Monetary Fund (IMF) demand that the reprieve be removed. This means that fuel prices that are no longer set according to the standards we lobbied for will continue hurting further,” a statement from MAK read in part.
While Mbugua revealed they would look for legal incentives, MAK was worried that the hike would lead to the adulteration of fuel.
“Since last year when petrol rose by 13 per cent, and diesel was up 18 per cent after the subsidy was removed fuel prices have remained static raising serious questions about why the formula set by Energy Bill 2010 is no longer applied by Energy Petroleum Regulator Authority (EPRA).
“Fuel adulteration has increased to worrying levels where cheap kerosene is mixed with diesel and petrol knocking vehicle owners' engines,” MAK warned.
EPRA clamps down on petrol stations and vehicles using adulterated fuel in a bid to save costs.
“A person who stores, transports or offers for sale adulterated petroleum, commits an offence and shall on conviction, be liable to a fine of not less than five million shillings or to a term of imprisonment of not less than two years or both,” EPRA states pursuant to Section 92 of the Petroleum Act, 2019.
