Taxes now cross 40pc of the price of a litre of fuel
A pump attendant fuels a car in Nyeri town on January 14, 2024.
Taxes and levies on a litre of fuel have crossed the 40 per cent mark, underscoring the heavy taxation that continues to drive pump prices in the country.
In the monthly pricing cycle set last Friday, taxes and levies account for 40.1 per cent of the price of a litre of super petrol, 36.37 per cent of diesel and 34.67 per cent of kerosene.
The share of taxes and levies in the cost of a litre of fuel has mostly ranged between 31 per cent and 38 per cent, with the share being highest in super petrol and lowest in kerosene.
Tax rates on a litre of fuel are constant, but other cost elements such as crude prices vary, which means that the portion of the levy in the price matrix may rise even without changes to the tax.
Motorists are paying Sh189.84 for every litre of super petrol, with Sh76.20 being taxes and levies. For the Sh173.10 that consumers are paying for a litre of diesel, Sh62.97 is going to taxes and levies.
Kenya charges seven levies and two taxes on fuel, with the heavy taxation being blamed for denying consumers bigger price cuts despite the big drops in global costs of fuel and a strengthening shilling. President William Ruto last year defended the heavy taxation of fuel, saying that Kenya lags behind most other economies in taxes.
For the fuel cargo that the Energy and Petroleum Regulatory Authority used to set the current prices, global prices of diesel fell by 7.7 per cent to $680.20 per barrel while those of super petrol dropped by 8.35 per cent to $849.52 per barrel. The shilling also rallied to exchange at 132.72 units to the dollar last month, compared to 134.63 in April.
Despite this, the heavy taxation denied consumers significant drops in local pump prices.
Value Added Tax (VAT) at the rate of 16 per cent, excise duty, road maintenance levy, Petroleum Development Levy (PDL), Import Declaration Fee and Railway Development Levy are the main taxes on fuel. Others are the Anti-Adulteration Levy, Merchant Shipping Levy and Petroleum Regulatory Levy.
Parliament passed law changes that doubled VAT from 8 per cent in July last year, sending pump prices to record highs. This came two years after Parliament rejected a recommendation by one of its committees to lower PDL to Sh2.50 per litre of fuel and reduce the then 8 per cent VAT on petroleum products to 4 per cent.
While the heavy taxes have hurt consumers, the Kenya Revenue Authority has ripped big. For example, it collected an estimated Sh25.9 billion more in fuel taxes between July and December last year, with collections hitting Sh164.03 billion.
The National Treasury and Ministry of Energy are tasked with developing taxation policies on fuel and passing them to Parliament for adoption.
