Traders warn Kenya growth to suf­fer on new fuel tax

Business Daily (Kenya) - - TOP NEWS -

Kenya’s eco­nomic growth mo­men­tum for this year could be snuffed out if a widely un­pop­u­lar 16 per cent Value Added Tax on fuel is main­tained, the coun­try’s cham­ber of com­merce said, point­ing at higher prices of goods and trans­port.

The tax, which came into force on Septem­ber 1, is part of a gov­ern­ment bid to boost rev­enue col­lec­tion in or­der to nar­row its fis­cal deficit and se­cure an ex­ten­sion of a standby credit fa­cil­ity from the In­ter­na­tional Mone­tary Fund.

The High Court on Thurs­day or­dered a tem­po­rary sus­pen­sion of the tax, but prices at petrol sta­tions vis­ited by Reuters on Fri­day had not come back down.

“We are ask­ing the gov­ern­ment to re-think its op­tions for fi­nanc­ing its de­vel­op­ment and re­cur­rent ex­pen­di­ture in­stead of over­tax­ing var­i­ous prod­ucts that al­ready bear large tax bur­dens,” the Kenya Na­tional Cham­ber of Com­merce and In­dus­try (KNCCI) said in a state­ment.

The Trea­sury could not im­me­di­ately be reached for com­ment.

The fi­nance min­istry ex­pects eco­nomic growth to re­bound to 5.8 per­cent this year af­ter drought, jit­ters over a pres­i­den­tial elec­tion and slug­gish pri­vate sec­tor credit growth cut last year’s growth to 4.9 per cent.

“The re­cent resur­gence of the econ­omy will be neg­a­tively im­pacted by this move and this will re­verse any growth we have seen in the past year,” KNCCI said.

The new VAT on fuel sent the re­tail price of petrol up by 12 per­cent per litre. Trans­port op­er­a­tors have also raised their charges and some petrol deal­ers have gone on strike to protest against the new tax, caus­ing fuel short­ages. The tax was orig­i­nally in­cluded in a law passed in 2013, but was post­poned sev­eral times, amid protests about its im­pact.

-FILE

PROTEST Fuel tanker driv­ers have protested against the new tax.

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