MPs want to cut three taxes by half, reduce profits by oil marketers and compel the government to reinstate the Sh18 billion meant to cushion consumers to bring down petroleum prices.
The taxes targeted for reduction are Value Added Tax (VAT) charged on both fuel and liquefied petroleum gas (LPG) as well as the petroleum levy. Collectively, the tax reductions total Sh27 billion, which MPs say will substantially reduce fuel prices that have risen sharply, sparking public uproar.
According to a report by the National Assembly’s committee on Finance and National Planning, the proposals, once adopted by the House, will offer great relief to consumers.
The committee whose 14-day deadline to submit the report lapsed yesterday, sought a seven-day extension to conclude investigations into high demurrage costs that also contribute to the high fuel prices.
“We understand the urgency of this matter, but in our engagement with stakeholders, we continue to receive new information that is very critical in the stabilisation of fuel prices,” said committee chairperson Gladys Wanga.
Sources within the committee told the Nation that there is no transparency in the payment of demurrage costs to shipping lines – the cost incurred as the ship is delayed in the high seas awaiting to dock and offload fuel.
Paid Sh55 million
“We have received documents showing that one ship alone was paid Sh55 million while just stationed at the Port. We have also learnt not all the demurrage costs are given to the shipping line,” said the source.
Speaker Justin Muturi granted the committee’s.
According to the committee’s recommendations seen by the Nation, MPs want the VAT charged on fuel reduced from the current 8 per cent to 4 per cent. The lawmakers have asked Treasury to prepare a supplementary budget to reflect the expected Sh22.6 billion reduction in revenue should the amendment pass.
Also set for reduction is the VAT rate on LPG from the current 16 per cent to 8 per cent. MPs have also directed Treasury to immediately grant approval to the Kenya Pipeline Company to set up an LPG plant so as to remove the current monopoly.
The committee has also recommended the reduction of the Petroleum Development Levy charged on super petrol and diesel from Sh5.40 to Sh2.50 per litre.
Oil marketers’ gross margins, the MPs propose, should be reduced by Sh3 from the current Sh12 to Sh9 per litre.
“The Ministry of Petroleum and Mining and Petroleum Regulatory Authority should commence the process of reviewing current pricing formulas with a view to ensuring all parameters in the current formula can be accounted for and determine whether Oil Marketing Companies margins are justifiable,” reads the report. BY DAILY NATION