Pressure is mounting on the government to review taxes imposed on fuel after Senators challenged the Kenya Revenue Authority (KRA) to explain why motorists and businesses continue to bear the burden of multiple levies on petroleum products, with lawmakers calling for measures that could lower pump prices and ease the cost of living.
The concerns were raised on Thursday when KRA officials appeared before the Senate Standing Committee on Energy to explain the country’s petroleum taxation system, fuel import procedures, customs administration and revenue collection processes.
Tana River Senator Danson Mungatana questioned the authority on the nine taxes and levies charged on petroleum products, seeking clarity on which of them could be removed to make fuel more affordable.
“Among the nine taxes imposed on fuel, which taxes can be dropped to make the fuel cheaper in Kenya?” Mungatana asked.
The Senator also questioned why government efforts to reduce the cost of fuel have largely focused on Value Added Tax (VAT), while other charges remain in place.
“We want to know if we can give the minister powers to vary the other eight taxes on petroleum products,” he said.
Committee Chairperson Oburu Oginga also pressed KRA for answers, asking why the government had chosen to target VAT instead of reducing all the taxes and levies by a smaller amount.
“Why did the government target VAT only instead of reducing all nine taxes and levies by a small margin?” Oburu posed.
In response, KRA Commissioner for Customs and Border Control Lilian Nyawanda said the Cabinet Secretary’s options were limited under the existing legal framework, making VAT the easiest tax to adjust.
“The Cabinet Secretary had a leeway to reduce the VAT, and that is why he was quick to reduce it as the low-hanging fruit,” Nyawanda told Senators.
She explained that VAT and excise duty are applied differently.
According to Nyawanda, VAT is calculated using the customs value of imported fuel, which includes the cost of the product, freight and insurance, while excise duty is charged based on the quantity of petroleum products imported into the country.
Murang’a Senator Veronica Maina sought clarification on the collection of fuel taxes, asking whether the levies are imposed before petroleum products enter the local market or after they are released for consumption.
The committee also turned its attention to concerns surrounding contaminated fuel that was shipped into the country aboard MV Paloma.
Kakamega Senator Boni Khalwale questioned the handling of the consignment and sought accountability over revenue collected from the shipment.
Khalwale further proposed the temporary suspension of some fuel-related levies to cushion consumers and businesses facing economic pressure.
“We should stop the railway and road maintenance levy until the economy improves and the Iran-USA war ends,” he said.
Nyawanda acknowledged that managing the petroleum sector remains challenging because of the many institutions and players involved in the fuel supply chain.
“We have so many players in the fuel market that make it convoluted and hard to implement the integrated fuel system,” she told the committee.
KRA maintained that its role in the sector is limited to customs administration, tax assessment and cargo clearance.
The authority told Senators that petroleum imports are processed through the Integrated Customs Management System (iCMS), with all taxes and levies collected before the products are released for local consumption.
The authority also called for stronger coordination among government agencies involved in the petroleum sector.
KRA said improved integration of systems and enhanced reporting requirements would boost accountability, transparency and efficiency throughout the fuel supply chain.