From September 1, the prices of petroleum products will rise steeply when they attract 16 per cent value added tax (VAT) whose implementation was delayed by a three-year grace period.
Kamau Thugge, the Treasury principal secretary, says the grace period is over and Kenya will have to honour a promise it made to the International Monetary Fund (IMF) on the new taxes that will increase the price of petrol in Nairobi by about Sh17.9 per litre to Sh130.15.
Diesel that powers commercial vehicles and tractors for farmers will rise to Sh119.77, a climb of Sh16.50 while kerosene, the poor households’ fuel for lighting and cooking will rise to Sh99.44 a litre, going up by Sh13.70. This means that farmers will pay more to prepare their fields, something that may hurt crop production by reducing acreage and use of inputs like fertiliser.
What’s more, the bulk of Kenyans relies on public service vehicles for transport; they are likely to increase fares, hurting the low-income earners.
However, it is estimated that this taxation will grow collection by another Sh71 billion yearly, helping to boost revenues and cut budget deficits. These gains make a lot of sense, however, there are fears that prices of basic products may go up. We urge the Treasury to proceed with care, not to hurt the poor.