Fuel tax protesters vow to paralyse traffic

A group of motorists has announced plans to paralyse road transport Wednesday while business leaders have warned of a looming surge in the cost of living, as pressure mounts on the Treasury to shelve a 16 per cent tax on fuel starting next month.

Motorists Association of Kenya, a lobby which champions interests of private vehicle owners, has said it will mobilise car owners to park cars on major roads for three hours on Wednesday from 7.30am to 10.30am.

The Kenya Private Sector Alliance (Kepsa), a mouthpiece for business leaders, Monday released a statement warning the impending implementation of value added tax (VAT) on petrol and diesel will raise the cost of goods and services by at least four per cent.

Treasury Principal Secretary Kamau Thugge reaffirmed a fortnight ago that the levy will be enforced from September 1, after a five-year relief.

IMF-proposed reforms

The implementation of the standard 16 per cent VAT, part of the overarching reforms proposed by the International Monetary Fund (IMF), came into force on September 2, 2013 but the charge on fuel was suspended for three years to 2016.

The grace period was, however, extended by another two years, which end at the beginning of next month.

Its implementation will see petrol prices shoot to more than Sh131.93 per litre in Nairobi, while diesel and kerosene will cost highs of Sh119.18 and Sh98.54 from the current Sh102.74 and Sh84.95 per litre, respectively.

Kepsa chief executive Carole Kariuki warned the projected rise in fuel prices will result in an increase in the cost of production and manufacturing, piling up costs for large and small businesses.

The increased fuel costs will also affect transport and farming, with homes feeling the ultimate pinch in final prices of goods and services.

“The country will not be in a position to attain the anticipated two-digit GDP (economic) growth, generate jobs and create wealth as envisioned in our development blueprint,” Ms Kariuki said in a statement.

Uncompetitive

“In our opinion, the increase in cost of doing business will not only impact the local investors, but also render our economy uncompetitive and repel investors who would invest directly in our economy including the Big Four opportunities.”

The Kenyan economy largely runs on diesel, which powers commercial vehicles, farm machinery and industries, while car owners largely depend on petrol to commute.

The motorists’ strike could impact heavily on the economy in form of lost productivity given that most Kenyan workers report to work stations at the targeted hours.

Most sectors operate on the 8 am-5pm grind.

“Motorists have rejected these new taxes. They will be counterproductive,” the association’s chairman, Peter Murima, said. “We’ll park on major roads across the country on Wednesday.”