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Passengers, PSV operators united in rejecting fuel tax

The new tax regime has seen the price of super petrol in Nairobi rise to Sh127.8, diesel Sh115.08 and kerosene Sh97.41/FILE

NAIROBI, Kenya, Sep 3 – The introduction of a 16 per cent Value Added Tax (VAT) on petroleum products is taking a toll on a section of bus operators who are yet to review transport fares.

The new tax regime has seen the price of super petrol in Nairobi rise to Sh127.8, diesel Sh115.08 and kerosene Sh97.41.

While a section of bus operators plying Nairobi routes have raised fares by between 25 to 50 per cent, other operators who a yet to effect the changes have registered concern over diminishing profit margins since the new tax charge took effect on Saturday.

Public Service Vehicles (PSVs) operating in estates on Mombasa Road increased their fares from Sh80 to Sh100 during peak hours with those operating the South ‘B’ route raising fares by Sh10.

Commuters from Rongai will have to contend with a Sh50 addition to bus fares which will see them pay Sh150 during peak hours.

In Mombasa County, commuters were forced to walk to the Central Business District as a section of PSV operators withdrew their services in protest of the new VAT.

“We’re really feeling the pinch. The net revenue per bus was ranging from negative to Sh2,000 a day. You see we have loans and maintenance costs to pay,” Rodgers Moffat, a Fleet Manager with Citi Hopa PSVs told Capital FM News on Monday.

According to Moffat, Citi Hopa was yet to review fares since the decision has traditionally been made after consultations with three other peer companies including the Kenya Bus Service (KBS).

Moffat said should the decision to increase fares be taken, the business is likely to be negatively impacted as passengers are likely to shun peak hours in a bid to avoid high transport costs.

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“The common passenger will sit in town waiting for low peak hours when he can pay less. He will not spend what he doesn’t have,” he explained.

Moffat said the bus operators were hoping the Finance Bill (2018) which seeks to postpone implementation of the tax for another two years will be assented into law by President Uhuru Kenyatta to reverse the application of the 16 per cent VAT on petroleum products.

A Customer Service Attendant at a filling station within Nairobi’s Central Business District told Capital FM News on Monday that the 16 VAT had significantly affected sales as fewer vehicles refuelled.

Stephen Ndunda said traffic into the fuel station had reduced by at least 30 per cent by noon.

“Before this VAT we had a number of customers but since Saturday daily traffic has been on the decline. We’re talking of a thirty per cent drop at the moment. It is likely people are leaving their cars in their homes,” said Ndunda.

According to National Assembly Majority Leader Aden Duale, the 16 per cent tax charge on petroleum products will remain operational until the Finance Act (2013) is suspended further in line with a resolution passed by the House on Tuesday last week when the Finance Bill (2018) was adopted.

“President Kenyatta can sign the Bill so that the VAT is suspended until 2020. Alternatively, he can still disagree with the National Assembly and say the government needs resources to fund its programme,” Duale said at the weekend.

The Finance Act (2013) has been suspended twice following public outcry.

In a statement on Saturday, the Kenya Revenue Authority (KRA) confirmed the application of the 16 per cent VAT saying the period for which the Finance Act (2013) had been suspended had lapsed.

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“The changes are contained in the Finance Act 2013 which extended the exemption for three (3) years. Further, the exemption was extended by two more years under the Finance Act 2016. Consequently, the VAT charge on petroleum products has now come into effect,” Commissioner General John Njiraini said in a news release.

Njiraini directed fuel dealers to submit VAT returns to KRA by October 20.

“KRA has advised importers, depots, distributors and retailers, including pump stations, to charge, account and submit returns on the same to KRA by 20th of the succeeding month,” he said.


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