NAIROBI, Kenya, Sep 2 – The increase of petroleum products as a result of a 16 percent Value Added Tax will derail the government’s Big Four Agenda.
Manufacturers say higher fuel prices will increase the cost of transportation of raw materials and finished products, as well as lead to an increase in the cost of power, among other overhead costs.
Head of Policy, Research and Advocacy at the Kenya Association of Manufacturers, Job Wanjohi, says the increase in the cost of doing business goes against the efforts made towards the attainment of the Big 4 Agenda and improving the livelihood of Citizens.
“The business environment in Kenya is increasingly becoming cost disadvantaged and a great disincentive for Foreign Direct Investment. To stay afloat, business will have to make very hard and drastic decisions of whether to shoulder the extra cost or pass over the tax burden to already overburdened consumers in order to meet their overhead costs,” said Wanjohi.
He further says the big four agenda that seeks to increase the Manufacturing sector’s contribution from the current 8.37 percent to 15 percent to the GDP by 2022 will be undermined by the higher energy cost.
“Such fiscal policies will definitely undermine all Pillars of Big Four Agenda.”
ERC released new price guidelines taking effect from September 1 with petrol now retailing at Sh127.80 per litre in Nairobi from Sh113 while a litre of diesel will now cost Sh115 and kerosene at Sh97.
In Mombasa, a litre of petrol will retail at Sh124.49 and Sh129.71 in Kisumu.
KAM advises that the government needs to look at reducing the overall cost of living, improving purchasing power and standard of living for all, including the reduction of VAT on items such as sugar, milk, tea leaves, rice, cooking oil and petroleum products.
“If the costs of these products come down, Citizens are then able to save substantial amounts of money to afford other basic amenities. As an Industry, we believe the Finance Bill 2018 will remedy this once enacted,” said Wanjohi.