Prof. Njuguna Ndung’u, Cabinet Secretary (CS) of the National Treasury, defended the Finance Bill 2023’s recommendations to raise taxes in several industries, arguing that they represent a forecast of where the economy should go.
According to Prof. Ndung’u, Kenya has been rated as one of the regions paying minimal taxes in a variety of products, hence some of the proposals in the Bill are aimed to align Kenya with other East African states.
“The new tax plans are part of Kenya’s effort to harmonize with the community in East Africa. Prof. Ndung’u stated that one of the reasons Kenya is rated lowest in value added tax in a lot of categories is because tax increases are used to achieve tax uniformity.
Speaking while welcoming two ships carrying petroleum products, Mv Proteus Jessica and Mv Nan Ln Wan, at Kenya Ports Authority’s (KPA) Kipevu Oil Terminal 2, the CS stated that some of the ideas would only be applicable if approved during the public participation stage.
National Treasury included suggested changes to several tax statutes, including the Income Tax Act, the Value Added Tax Act, the Tax Procedures Act, and the Miscellaneous Fees and Levies Act, in the 2023/2024 Finance Bill.
If the proposal is approved, the tax on petroleum products would increase from the current 8 percent to 16 percent starting on July 1. This is one of the concerns that have been highlighted by a number of stakeholders in the Bill.
In its analysis of the Bill, the auditing company KPMG issues a warning that the proposal “is likely to have an impact on the prices of transportation and the production of goods, increasing the inflationary pressure on the economy.”
According to Prof. Ndung’u, one of the government’s tactics to stabilize the dollar is the government-to-government program to import petroleum products since it provides the government time to pay for the goods later.
Energy and Petroleum Services In order to ensure that there is a steady supply of such goods and to keep costs under control, Davis Chirchir on the other hand claimed that the government is in the final stages of increasing storage capacity for petroleum products in Mombasa and other cities.
KPRL has 45 tanks totaling 484 million liters of storage space, of which 254 million liters are set aside for refined goods and the remaining 233 million liters are set up for crude oil.
According to Mr. Chirchir, the government is also nearing completion of a 30,000 metric ton Liquefied Petroleum Gas (LPG) processing and storage facility. Once finished, the Mombasa plant will speed up the loading of cooking gas for distribution by trucks, reducing the need for demurrage.
Demurrage is the name for the fee that the merchant pays for the use of the container inside the terminal after the free time has passed as a result of delays in offloading caused by a lack of storage facilities. This fee is typically passed on to the customer, increasing the price of petroleum products. As oil marketing businesses convey the benefits of faster loading onto consumers, KPC predicts that once operational, faster loading will result in a 30 percent reduction in LPG prices.