Commuters using public service vehicles in the Mt Kenya region will from September 1 pay 20 per cent more for bus fare to cover additional cost of fuel as petroleum products start attracting 16 per cent value added tax (VAT).
The Mt Kenya Matatu Owners Association chairman, Rufus Kariuki, announced Thursday that the fare rise will be effected on buses and matatus operating in all the counties in the region.
"We bought these motor vehicles on loan, we need to pay for their insurance covers as well as meet their maintenance costs. We cannot adequately cater for that with the new fuel levy without making adjustments on the fare charges," said Mr Kariuki after holding a stakeholders’ meeting at a Thika hotel.
Motorists are set to pay a record Sh130.15 per litre of petrol or about Sh18 more beginning next Saturday.
Commuters on the Nairobi-Thika route will pay about Sh120, up from the current Sh100 peak rate.
Those on the Thika to Embu commute will pay about Sh300 from the current Sh250, while Makuyu to Chuka fares will rise to about Sh360 from the current Sh300.
The bus fares vary by about Sh50 depending on whether a public service vehicle (PSV) is express service or not.
Promise to IMF
Treasury Principal Secretary Kamau Thugge last week 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.
He said the grace period for the new law was over.
The increase in prices will be felt countrywide. Nairobi PSV operators said they would increase fares by about Sh30 on all city routes.
“The addition in fares will of course be painful to commuters but the increase has to take effect because taxation of fuel translates to an added cost to public service vehicles operators,” said Matatu Owners Association (MOA) chairman Simon Kimutai on Monday.
Estate PSVs will increase fares by between Sh10 and Sh20 depending on the distance, said Mr Kimutai.
A strike called by the Motorists Association of Kenya to protest the tax increase flopped as PSV owners withheld their support, citing losses to their businesses.
Introduced in 2013
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.