Uber and a local taxi hailing firm have signalled plans to raise fares to cover additional costs following a new fuel tax that will on Saturday raise the price of a litre of petrol by Sh18.20.
Uber says it is collecting data from drivers to determine operational costs in a survey that will inform its reaction from Saturday when petroleum products start attracting 16 per cent value added tax (VAT).
Nairobi motorists are set to pay a record Sh131.93 per litre of petrol or about Sh18.20 more under the new tax regime that has elicited a lot of reactions from varied sectors.
The sharp rise in petrol prices sets the stage for fresh confrontation between drivers and tax hailing firms who have in recent months staged regular strikes and street protests in Nairobi over lower fares amid rising operational expenses.
“We are aware about the planned increase of fuel prices starting from September 1, 2018 and we are looking at possible solutions,” said Uber East Africa spokesperson, Janet Kemboi.
“We are also busy collecting data from our driver cost survey which will give us deeper insights into our current driver economics.”
Its global rival Taxify, which has gained popularity in Nairobi in recent months, did not respond to Business Daily’s questions on effects of the new tax on fares.
But rival Little says it will revise the prices if there is a need. The firm increased fares in July.
The 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.
Employers and workers lobbies have opposed the new tax, arguing it will increase the cost of doing business and stoke inflation, hurting households grappling with costly electricity.
The new tax comes as cab drivers lament that the recent rise in fuel prices and lower fares together with more taxi hailing cars on the road make conditions tougher, meaning their earnings were increasingly dropping.
“There will be no cars on the road if fares are not increased to match the new tax,’’ said an Uber driver who sought anonymity.
“We are reaching a point where we cannot repay loans, service the vehicles and leave something for our families. The new tax will make life unbearable for us.”
He added that competition has cut his weekly gross earnings by more than half over the past two and half years to about Sh23,000.
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.
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.