The push by the National Treasury to levy 16 per cent VAT on fuel was ill-advised, as it was disastrous.
- The 16% levy on fuel came into effect on September 1, pushing the price of fuel to historically high levels
- It was hoped Uhuru would sign the Bill into law and save Kenyans from the effects of high fuel prices but he declined
- Uhuru thus send the bill back to Parliament for further engagement by legislators and the public
- The High Court in Bungoma recently issued an order suspending implementation of the levy, which was ignored by the relevant government agencies
Fuel drives the economy and any levy on it automatically pushes up all prices with a catastrophic impact on the citizens. Already, motorists pay fuel levy, itself an unnecessary burden. Adding another layer of taxation is extremely burdensome.
After the VAT was implemented, the cost of petrol spiked to Sh130 per litre in Nairobi from the previous average of Sh105.
Consequently, public service vehicle operators threatened to raise fares by not less than Sh30, literally inflicting more pain on commuters already agonising over the high cost of living.
The plan to impose the levy was first mooted in 2013 on the advice of the International Monetary Fund and was to be implemented in 2015 as part of the strategy to raise revenues for the Treasury.
But it was suspended exactly because of its potential devastating effects on the economy and the fact that fuel attracted other levies.
Early this year, the international lender renewed the pressure on the Treasury to enforce the levy, using it as a condition for signing a fresh tranche of Sh150 billion insurance loan that is intended to cushion the shilling against external currency fluctuation shocks.
National Treasury Cabinet Secretary Henry Rotich went ahead to include it in the Finance Bill despite stiff opposition from consumers. That has since elicited protracted debate in many circles.
Any reasonable government listens to its citizens. When they raise the alarm over high taxation, it behoves the authorities to take heed and make amends.
Anything to the contrary sends very wrong signals, depicting the government as an insensitive and uncaring administration that is ready to play ball with the international donors at the expense of the people.
Yet, as experts have established, Kenya does not need the insurance loan and, often, even other monies being flaunted by the lenders.
As fittingly suggested by the MPs, the point is not just postponing implementation of the VAT levy until 2020; it should be scrapped altogether. This is because the reason why it was rejected in the past and now will still obtain in the next two years.
Taxpayers are hard-pressed and should not be pushed to the wall. They have to be protected against such predatory policies that could inflict more harm than good on the citizens. Let’s do away with the fuel tax once and for all.
Sources: Editorial, Daily Nation