State seeks Sh3.7 billion fuel excise tax increase

The government will net Sh3.7 billion in revenue if the proposal to increase the rate of excise duty on fuel is approved by Parliament, the taxman says.

The High Court last week suspended the Kenya Revenue Authority’s (KRA) move to increase excise duty on petroleum products by 4.97 per cent from Friday last week pending hearing of a case filed by two petitioners. 

Petroleum products are among 31 excisable products that KRA in August sought to raise their excise duty beginning October 1 to cater for annual inflation as required by the Excise Duty Act, 2015.

However, the increase can only take effect if approved by the National Assembly and the National Treasury Cabinet Secretary.

KRA Commissioner-General Githii Mburu on Monday said failure to implement the higher excise duty rates and the 1 percent minimum tax on business revenues, whose implementation was also stopped last month by the High Court, would punch a huge hole in the government’s revenue targets.

“If we do not implement those two taxes it will affect our fiscal space, as a country it means the government will not be able to fund certain objectives it has set out to do. Kenyans must be alive to this fact that there are roads that we are not going to build, medicines, security and other services that we are not going to support,” Mr Mburu said.

The KRA boss was speaking at the launch of the authority’s 17th taxpayer’s month, an annual fete recognising the role of taxpayers in meeting the government’s spending needs.

“So we need to make sure that we support these taxes. The amount we expect from those excise duty adjustments is about Sh3.7 billion and from the minimum tax it is roughly Sh20 billion. So if we lose that money, then we will have to cut out some services which I believe is not good for Kenyans,” Mr Mburu said.

The KRA boss said the government would refund monies collected from businesses for the minimum tax before the court declared it unconstitutional.

“Once we have exhausted all the avenues (of alternative dispute resolution), KRA has mechanisms of refunding those taxes. If you want us to refund, you come…when your money is with the government it is safe,” he said.

Treasury Chief Administrative Secretary Nelson Gaichuhie said the government will look to expand the tax base by bringing in more untaxed individuals into the tax system to plug revenue gaps should KRA fail to get the nod to implement the taxes.

“We will work together with KRA to make sure we net more taxpayers so that we have more people paying their taxes,” Mr Gaichuhie said.

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