The plan to introduce 16 per cent VAT on petroleum products could be delayed for two more years if Parliament approves amendment to the law that sets taxes to be paid in a financial year.
Minority Whip Junet Mohamed has filed an amendment through the Finance Bill, 2018 to suspend the implementation of new tax to 2020 to cushion Kenyans from the high cost of living.
Nairobi motorists are set to pay a record Sh131.93 per litre of petrol or about Sh18.20 more beginning September 1, sparking fears of a sharp rally in inflation
“Kenyans are going through tough times and it is only fair that we suspend the implementation of this VAT until the right time,” Mr Mohamed said on Tuesday.
The government has twice deferred the implementation of the 16 per cent VAT in the past two financial years, fearing public backlash.
Treasury has confirmed that petroleum products will start attracting VAT on September 1 in line with Kenya’s promise to the International Monetary Fund (IMF) two years ago.
The IMF has been pressing Kenya to do away with tax exemptions as part of a wider plan to grow revenues, reduce budget deficits and ultimately slow down the debt pile-up that has in recent months become a source of national concern.
VAT was first introduced on petrol, diesel, kerosene and jet fuel in the VAT Act of 2013, with a three-year grace period that would have seen it come into force in 2016 when it was once again deferred to September 2018.
Public transport operators say they will increase fares from Saturday following the new tax, which will have a ripple as makers of goods and service providers raise their prices to cover additional transportation costs.
The Central Organisation of Trade Union (Cotu) has threatened to call for a national strike if the government implements the new tax.
“... we shall call for a national strike of all our members and the country will come to a standstill. We will also ensure every citizen takes part in the protest to remind Rotich ( Treasury CS) that he is there to serve workers,” Atwoli said.