Rift Valley Railways seeks Sh1.2 billion fuel levy refund

Railway operator RVR is seeking refund of Sh1.3 billion it claims to have illegally paid the government through the Road Maintenance Levy Fund (RMLF) in the past four years.

Rift Valley Railways, which was awarded a 25-year concession to run East Africa’s oldest railway line, has sued the government for wrongfully charging it the levy that is specific to road users despite its continued operation as a railway-specific company.

“The petitioner will not be running its trains on the road network, making it unfair, inequitable, unjust and manifestly unconstitutional to continue subjecting it to the levy charged on diesel it purchases for powering locomotive engines used on rail tracks,” RVR says in a petition filed at the Nairobi Commercial Court.

RVR says it has been paying fuel levy since 2011 despite the authorities knowledge that the rail operator does not use the fuel to run any vehicles on the roads.

The firm is seeking exemption from the levy citing similar concessions to power generators who use diesel to power their plants.

Fuel levy is charged at the rate of Sh9 per litre of petrol or diesel and the money used to develop and maintain roads.

RVR is seeking court orders stopping the tax authorities from charging it the levy that costs it Sh100 million every month, which it says has negatively affected its cash flow.

In the petition, filed under a certificate of urgency at the constitutional and human rights division in Milimani Law Court, RVR has named the Attorney General, the Treasury secretary, the ministry of Transport and Infrastructure and its Cabinet secretary as respondents.

The rail operator estimates that the monthly costs are likely to increase as the volume of cargo traffic rises. 

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RVR further claims that implementation of the levy has reduced its competitive edge against its competitors who use road transport.

“Obligating the petitioner to pay the road users tax through the imposition of the RMLF puts the petitioner at a grave economic disadvantage in comparison with its competitors who use the roads network. In effect, the petitioner is through the RMLF funding and subsidising the competition,” RVR says.

The rail operator said it has had difficulties in obtaining archived documents for the period before 2011 and promised to produce the same once they become available.

RVR further says that it has on numerous occasions tried to raise concerns with the Transport and Treasury secretaries but both have failed to grant it a tax exemption.

The operator therefore concludes that the government is deliberately discriminating against it as electricity producer KenGen has been granted an exemption from paying the levy in respect of the diesel it uses to power its generators.

“The exemption granted to KenGen, which is a non-road user and failure to grant a similar exemption to the petitioner amounts to unequal treatment of parties. No justification whatsoever has been proffered by the respondents for treating the petitioner differently from KenGen and for declining to grant the exemption to the petitioner,” RVR said.

The rail firm’s battle with the tax authorities is its latest in a series that has seen the government accuse it of failing a performance test nine years after it won a concession to manage the railway network.

In May last year, the government gave RVR nine months to put its house in order and register improved performance or face unspecified sanctions.