Editorials

Spare Covid-weary Kenya another fuel tax increase

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An attendant at a Total Petrol Station in Nairobi. FILE PHOTO | NMG

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Summary

  • The government should explore other ways of plugging the budget hole without having to introduce new taxes that will push Kenyans into economic depression.
  • We are of the view that there is still a lot of wastage in government expenditure. Wanton theft of public resources is also another malaise that is contributing to the ever-growing budget deficit.

The revelation that the International Monetary Fund (IMF) is pushing for the reintroduction of the 16 percent VAT on all petroleum products is disturbing to a population that is reeling from the effects of Covid-19 pandemic and overtaxation.

It is understandable that the government needs new revenue streams to seal budget deficit and cut borrowing. However, overburdening taxpayers will not solve the problem overnight.

Kenyans are already feeling the pain at the pump following increases of petroleum product prices in recent months.

PRICING PRESSURE

Producers of services such as electricity and manufactured goods will factor in the higher cost of petroleum, unleashing pricing pressure across the economy with ramifications on the cost of living measure.

Kenya’s prices of diesel and petrol are the highest in East Africa, despite countries like Uganda and Rwanda that are landlocked relying on the Port of Mombasa to import their petroleum products.

Motorists in Nairobi are paying Sh122.81 per litre of super petrol from Sh115.18.

A check on GlobalPetrolPrices.com — a website that tracks fuel and electricity prices for over 150 countries — shows that a litre of petrol in Kampala is selling at Ush3, 960 (Sh118.90) while that of diesel is going for Ush3,700 (Sh111.10).

In Kigali, the capital city of Rwanda, a litre of petrol is retailing at 1,088 Rwandan franc (Sh120.26).

In Dar es Salaam, a litre of super petrol is selling at Tsh1,981 (Sh93.67), making it the cheapest in the region.

The government should explore other ways of plugging the budget hole without having to introduce new taxes that will push Kenyans into economic depression.

We are of the view that there is still a lot of wastage in government expenditure. Wanton theft of public resources is also another malaise that is contributing to the ever-growing budget deficit.

What the government needs to do is tackle corruption and put all revenue collected into prudent use. The Treasury should also stop borrowing for projects that we don’t need.