Thousands of jobs in Kenya’s petroleum retail sector could be at risk if the Kenya Revenue Authority (KRA) continues enforcing its mandatory electronic tax system requirements without reviewing the cost of compliance, fuel dealers have warned.
The United Energy and Petroleum Association Authority (Unepea) is calling for the suspension of the eTIMS forecourt integration requirements, arguing that the financial burden could force many petrol stations, particularly smaller operators, to close.
The association estimates that shutting down even half of the country’s fuel stations could result in more than 20,000 direct job losses.
The system, introduced last year as part of efforts to strengthen tax collection, requires petrol stations to connect their fuel dispensing operations to KRA’s electronic Tax Invoice Management System (eTIMS).
The authority says the technology is intended to ensure that every litre of fuel dispensed is recorded, while dealers who fail to comply face a Sh1 million fine.
However, petroleum traders say the cost of installing and maintaining the system is beyond the reach of many businesses. According to the association, automating a single petrol station costs between Sh400,000 and Sh1.2 million, excluding recurring expenses.
Dealers must also pay system integrators between Sh20,000 and Sh80,000 every month, in addition to meeting internet costs required to keep the technology operational.
Unepea Chairperson Irene Kimathi said the association was not seeking to avoid its tax obligations but wanted KRA to adopt requirements that take into account the financial challenges facing fuel retailers.
"If KRA closes even half of the fuel stations, which is essentially what it is doing by imposing unattainable requirements and fines, we lose more than 20,000 jobs directly, notwithstanding the psychological pressure at a time the economy is tough," Unepea Chairperson Irene Kimathi said in a statement.
Kimathi said the authority had stepped up enforcement, with KRA officers visiting fuel stations and issuing notices of offence to dealers over the past two weeks.
The association argues that the current approach could place smaller businesses under further pressure, potentially affecting their ability to continue operating and retain employees.
As an alternative, Unepea wants the government to collect value-added tax (VAT) at fuel depots instead of placing the burden on individual petrol stations.
"We propose that VAT be collected at depots. That will ensure not a single shilling is lost in revenue. Many governments around the world use this system," Kimathi said.
The association believes the proposed arrangement would enable the government to collect taxes while reducing the compliance costs faced by fuel retailers.
Dealers have also questioned whether the new system can be installed across all petrol stations, saying some fuel dispensers are too old to support integration with the technology.
They further argue that the system could expose operators to tax charges on fuel that has not actually been sold to customers. Kimathi said the requirements account for every litre dispensed, including fuel lost through spillage or used when calibrating pumps.
"This is lack of empathy and understanding of the business by KRA," Kimathi said.
The association has also raised concerns about losses that occur while fuel is being transported. According to the dealers, the system requires them to pay tax on every litre purchased before making sales, even when some of the fuel is lost in transit.
"Some fuel is lost in transit. The integrated system requires one to pay for every litre bought before selling it," Kimathi said.
Beyond the cost and technical challenges, Unepea has accused KRA of failing to give petroleum industry stakeholders adequate opportunities to raise their concerns before the system was introduced.
The association said independent dealers had attempted to engage the tax authority and government officials over the requirements but had not received responses to their letters.
"Independent
dealers attempted to engage KRA and the Cabinet and dealers attempted to engage KRA and the Cabinet and Principal Secretaries for National Treasury and Energy on this issue through letters but never received answers.
We are left feeling like slaves," Ms Kimathi said. "Our own government has turned a deaf ear to our requests. It does not have time to engage with us except when it is intimidating us and issuing threats.
The dealers maintain that their objection is not to taxation itself, but to the cost and practical challenges associated with implementing the new system. They want KRA to reconsider the requirements, taking into account the limitations of older equipment, the cost of automation and the losses experienced during fuel transportation and handling.
Unepea says a review could help protect jobs and keep smaller petrol stations in business while allowing the government to continue collecting revenue from the petroleum sector.