Senators Push for Fuel Tax Cuts
Senators have intensified calls for reductions in fuel taxes and levies, questioning the impact of multiple charges on petroleum products and urging the government to ease the cost of living burden on Kenyans.
The concerns emerged during a session of the Senate Standing Committee on Energy, where officials from the Kenya Revenue Authority (KRA) appeared before lawmakers to explain the country’s petroleum taxation framework, fuel pricing mechanisms, customs administration processes, and the implementation of the Government-to-Government (G-to-G) fuel importation arrangement.
Leading the charge, Tana River Senator Danson Mungatana challenged KRA to identify which of the nine taxes and levies imposed on petroleum products could be scrapped to lower fuel prices.
“Among the nine taxes imposed on fuel, which taxes can be dropped to make the fuel cheaper in Kenya?” Mungatana posed.
The senator also questioned why the government had focused primarily on Value Added Tax (VAT) when addressing fuel costs.
“He further added that the minister has the power to vary the VAT on fuel. We want to know if we can give the minister powers to vary the other eight taxes on petroleum products,” he said.
Committee Chairperson and Siaya Senator Oburu Oginga echoed the concerns, questioning the government’s strategy on fuel tax relief.
“Why did the government target VAT only instead of reducing all the nine taxes and levies by a small margin?” Oginga asked.
Responding to the lawmakers, KRA Commissioner for Customs and Border Control Dr. Lilian Nyawanda said the Cabinet Secretary’s options were limited under the current legal framework.
“The Cabinet Secretary had a leeway to reduce the VAT and that is why he was quick to reduce it as the low-hanging fruit,” she told the committee.
Dr. Nyawanda explained that VAT and excise duty are assessed differently. While VAT is charged based on the customs value of imported fuel, including the product cost, freight and insurance, excise duty is levied according to the volume of petroleum products imported.
Nominated Senator Veronica Maina sought clarification on the timing of tax collection, asking whether taxes and levies are imposed before or after fuel enters the local market.
The hearing also revisited concerns surrounding contaminated fuel reportedly delivered aboard the vessel MV Paloma. Kakamega Senator Boni Khalwale demanded accountability and sought details on the amount of revenue collected from the consignment.
Khalwale further proposed the temporary suspension of the Railway Development Levy and Road Maintenance Levy to cushion consumers from high fuel prices.
“We should stop railway and road maintenance levy until when the economy improves and the Iran-USA war ends,” he said.
Meanwhile, Homa Bay Senator Joyce Ogolla questioned the economic benefits Kenya derives from handling transit fuel destined for neighbouring countries.
“How does the country benefit from transit cargo that goes to neighbouring countries?” she asked.
Ogolla also raised concerns over fuel price disparities within the East African region, arguing that lower fuel costs in neighbouring countries make them more attractive destinations for investment.
Elgeyo Marakwet Senator William Kisang sought estimates on the fiscal impact of reducing fuel taxes, asking KRA to quantify potential revenue losses if VAT on petroleum products was reduced from 16 per cent to 8 per cent or if fuel was made zero-rated.
In response, Dr. Nyawanda defended KRA’s tax administration systems, noting that the authority works closely with the Kenya Pipeline Company (KPC) to track petroleum products and ensure proper tax collection.
“KRA and KPC systems are integrated to ensure seamless taxation,” she said.
However, she acknowledged challenges in monitoring the increasingly complex fuel supply chain.
“We cannot be able to tell if the fuel is under Government-to-Government arrangement or not,” she admitted.
Dr. Nyawanda attributed some of the challenges to the large number of stakeholders operating within the petroleum sector.
“We have so many players in the fuel market that makes it convoluted and hard to implement the integrated fuel system,” she told senators.
In its submission, KRA maintained that its mandate is limited to customs administration, tax assessment and cargo clearance. The authority said all petroleum imports are processed through the Integrated Customs Management System (iCMS), with taxes and levies collected before products are released for local consumption.
KRA further recommended enhanced integration of government systems and stronger reporting obligations among agencies involved in the petroleum supply chain. According to the authority, improved data sharing would enhance accountability, transparency and operational efficiency across the sector.
The Senate Energy Committee is expected to compile recommendations after receiving submissions from KRA and other stakeholders as lawmakers seek long-term solutions to concerns over fuel pricing, petroleum taxation and fuel supply management in Kenya.