NAIROBI, Kenya, Apr 15 — President William Ruto’s announcement that VAT on fuel will be reduced from 16 per cent to 8 per cent has triggered immediate legal and policy scrutiny, with the country’s tax law showing the measure may not be attained as an immeditate relief.
Speaking during a public address on Wednesday in Kisii, Ruto said the government would lower the rate to 8 per cent for three months to cushion Kenyans against high pump prices.
“We have also stepped in to bring down VAT from 16 per cent to 8 per centfor the next three months,” he said, framing the move as part of a broader Sh6.5 billion (sic) intervention to cushion fuel consumers from rising global prices.
While the government formmaly announced a Sh6.2 billion subsidy on Tuesday, the Value Added Tax Act sets a clear statutory baseline that constrains the lowering of VAT to 8 per cent.
Section 5(2)(b) provides that, in all non-zero-rated cases, “the rate of tax shall be sixteen per cent of the taxable value of the taxable supply.”
Section 6(1) allows a limited variance providing that the Cabinet Secretary for Treasurymay, by Gazette notice, amend the rate “by an amount not exceeding twenty-five per cent of the rate specified in section 5(2)(b).”
12 per cent minimum
In practical terms, that legal ceiling limits any downward adjustment from 16 per cent to a minimum of 12 per cent.
A reduction to 8 per cent therefore falls outside the statutory band and cannot be effected through a Cabinet Secretary order or presidential directive.
While 16 per cent is the legislated rate, and 12 per cent is the maximum allowable adjustment, 8 per cent would require an amendment to the Act by Parliament.
The implication is that the most headline-grabbing element of the announcement is not immediately actionable under existing law, despite being communicated as an active policy decision.
President Ruto’s announcement coincided with parallel proposals from lawmakers seeking deeper relief on fuel costs.
Kiharu MP Ndindi Nyoro has proposed a wider fiscal package including a Sh5 billion subsidy top-up, removal of a Sh7 per-litre fuel levy introduced in 2024, and a five-percentage-point VAT reduction.
Nyoro argued that “the drastic increment in fuel prices is unacceptable,” and estimates that combined measures could reduce pump prices by up to Sh27 per litre, driven largely by tax and levy adjustments rather than global oil movements.
His proposal also calls for a return to pre-2023 taxation levels, reflecting growing political pressure to unwind recent fuel tax increases.
While subsidy components such as the Sh6.2 billion allocation fall within executive budget authority, the VAT adjustment remains legally constrained.
The Act’s Section 5(2)(b) anchors the rate at 16 per cent, while Section 6(1) caps any variation at 25 per cent of that rate—effectively limiting reductions to 12 per cent.
Fuel prices have already risen sharply following the latest review by the Energy and Petroleum Regulatory Authority, feeding into transport and logistics costs and adding inflationary pressure across the economy.
