A petrol station attendant fuels a car. The government had hoped to collect Sh17.5 billion. FILE PHOTO | NMG
The taxman collected Sh14.6 billion from the controversial levy on petroleum products, missing the target by almost Sh3 billion.
The
Kenya Revenue Authority (KRA) told the National Assembly Finance
Committee the eight per cent Value Added Tax (VAT) on fuel had
successfully been implemented.
Treasury had targeted to
raise Sh17.5 billion from the levy that President Uhuru Kenyatta said
was badly needed to finance the government’s priorities.
“Imposition
of VAT on petroleum products at the rate of eight percent had a Sh14.6
billion revenue implication,” Mr Maurice Oray, KRA deputy commissioner
for corporate policy told MPs.
The VAT came into effect
on September 21 last year after the Opposition in Parliament failed to
raise the requisite quorum to overturn it.
The proposals contained in Mr Kenyatta’s memorandum on the
Finance Bill 2018 were adopted after it emerged that there were only 215
MPs present in the House.
Parliament requires at least two-thirds majority or 233 of the 349 MPs to veto the President's memorandum.
The
chaotic session was characterised by walkouts by a section of the
legislators who frustrated efforts to raise the requisite quorum.
The tax was originally included in a law passed in 2013 at 16 percent, but was postponed amid protests about its impact.
It implementation was followed by a countrywide uproar in an economy that largely runs on diesel and petrol.
To
calm nerves, the National Assembly halved the levy to eight percent, on
recommendation of Mr Kenyatta, through an amendment to the VAT Act 2013
that standardised the levy on all goods and services at 16 percent.
The VAT on petroleum was implemented in line with a deal Kenya made with the International Monetary Fund (IMF) in 2016.
Petroleum had been exempt from VAT although it remained one of the most taxed commodities in Kenya.
The
IMF had been pressing Kenya to do away with tax exemption as part of a
wider plan to increase revenues, reduce budget deficits and ultimately
slow down debt pile up that has in recent months become a source of
national concern.
The VAT charge on petroleum was part
of the tough conditions the IMF set for Kenya in exchange for a standby
credit facility that the country can draw in the event of economic
distress.
The VAT Act, enforced on September 2, 2013,
ushered in a tax regime where the more you consume, the higher tax you
pay with transitional clauses for essential products such as petroleum
products.
The IMF argument for reforms was that some of
the households did not need the exemptions on basic goods and that the
vulnerable groups such as the elderly and the disabled could be
cushioned through special social-protection programmes.
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