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Government and Policy

Court Saves Motorists From The Fresh Fuel Tax Increase

BY Jane Muia · October 4, 2022 11:10 am

KEY POINTS

The Court of Appeal in December upheld a ruling by the High Court to freeze an increase in the excise tax on petroleum products on grounds that it would put pressure on the cost of living. A liter of super petrol would have risen by 1.38 shillings and diesel by 0.70 shillings.

Motorists can now breathe a sigh of relief after a new ruling exempting them from the inflation adjustment tax that came into effect on October 1.

Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu on Monday said that the inflation adjustment will affect excisable products other than petroleum products. This comes as a reprieve to consumers who have been grappling with the effects of high pump prices.

A liter of super petrol is currently retailing at 179.30 shillings in Nairobi an increase of 20 shillings from the last review on August 14 when the commodity cost 159.12 shillings. At the same time, a liter of diesel is retailing at 165 shillings from 140 shillings, while a liter of kerosene is retailing at 147. 94 shillings up from 127.94 in August 2022 in Nairobi.

The Court of Appeal in December upheld a ruling by the High Court to freeze an increase in the excise tax on petroleum products on grounds that it would put pressure on the cost of living. A liter of super petrol would have risen by 1.38 shillings and diesel by 0.70 shillings.

KRA had rejected the High Court decision arguing that inflation adjustment is based on revenue projections as prepared by the National Treasury Revenue Framework and Budget Policy Statement to meet the revenue requirements. However, the court rejected the taxman’s petition saying it was premature and unprocedural.

The increase in excise tax on fuel would have spelled doom to consumers given the high prices of other common goods.  Manufacturers use fuel to transport their products. The commodity is also used to power machines in manufacturing companies as well as in the agricultural sector, meaning that the effects of the price hike would have consequently been passed to the consumers who are still struggling with the high cost of living.

Even though the adjustment is in line with the law that demands excise duty to be revised upwards in tandem with the cost-of-living measure, various lobbies, since 2020, have consistently urged the taxman to pause implementation of the annual inflation adjustment tax.

The groups have stated that this move affects excisable goods, thus causing more economic hardships to Kenyans. Petroleum Institute of East Africa (PIEA) warned that inflation adjustment would further increase fuel costs affecting the prices of products which would in turn trigger a low purchasing power. Low purchasing power would then see industries terminate workers to balance the cost, adding more pressure to many households.

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