Economy

Namanga border emerges as LPG tax battleground

A truck ferrying  liquid petroleum gas.

A truck ferrying liquid petroleum gas. There has been a snarl-up of trucks at the Kenya-Tanzania border town of Namanga following an impasse on clearing trucks. FILE PHOTO | NMG

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Summary

  • KRA Deputy Commissioner for Revenue and Regional Coordination Joseph Kaguru disclosed that the traders have been paying Value Added Tax (VAT) of eight percent instead of 16 percent.
  • This has prompted a standoff at the Namanga clearance post, leading to the KRA demanding Sh10.5 million from a section of traders who have been blocked at the border town.
  • Kenya doubled VAT on cooking gas from July 1 last year, prompting the cost of the commodity to hit historic highs as traders increase prices.

Traders of cooking gas have been paying lower tax to import the product from neighbouring Tanzania, denying the Kenya Revenue Authority (KRA) revenue while gaining from consumers buying at record prices.

KRA Deputy Commissioner for Revenue and Regional Coordination Joseph Kaguru disclosed that the traders have been paying Value Added Tax (VAT) of eight percent instead of 16 percent.

This has prompted a standoff at the Namanga clearance post, leading to the KRA demanding Sh10.5 million from a section of traders who have been blocked at the border town leading to snarl-ups of trucks since last week.

Kenya doubled VAT on cooking gas from July 1 last year, prompting the cost of the commodity to hit historic highs as traders increase prices.

The 13-kilogramme cooking gas is retailing at Sh3,400 from Sh2,250 in June before the government doubled the tax while the six-kilogramme commodity is going for Sh1,900 from Sh900, squeezing households grappling with the high cost of basic commodities.

“The traders have paid taxes but unfortunately they are not the taxes they are supposed to be paying under the law. We have given them the assessed taxes but unfortunately, none of them has paid,” Mr Kaguru said.

Kenya imports a huge chunk of cooking gas from Tanzania via the Namanga and Holili border posts and the remainder is imported through the Port of Mombasa.

The traders have also been ripping off consumers after their increased prices following the doubling of the VAT on the product to 16 percent through the Finance Act 2021.

Unlike diesel, super and kerosene, the prices of cooking gas are not regulated by the State, leaving consumers at the mercy of market forces.

Continued disruptions at the Namanga border post look set to prompt an increase in the cost of the commodity as traders take advantage of the supply hitches.

Cooking gas firms from Tanzania export about 40 percent of their annual volumes to Kenya highlighting the impact of the lack of many players to ship the product locally.

KRA crackdown

Mr Kaguru added that the traders are shipping in the commodity from the Middle East and using the Namanga border point to pay lower taxes under the pretext they are sourcing it from Tanzania.

“The impression being created out there that this LPG is from Tanzania is not true. This gas is coming from as far as Middle East and passing through some importers in Tanzania,” he said.

The KRA started a crackdown on the traders at the border town last week raising questions on why the taxman took nearly a year to discover the anomaly in the VAT payment of the commodity.

Failure to enforce the 16 percent on the product imported from Tanzania will hurt KRA’s revenue in the year ending next month further piling pressure on the Exchequer.

***Updated