Kenya: Musalia Mudavadi Links New Fuel Tax to Corruption

A motorist fuels at a petrol station in Nairobi on September 05, 2018.
5 September 2018

Amani National Congress leader Musalia Mudavadi has linked the 16 per cent Value Added Tax on petroleum products to "rampant corruption in the energy industry".

Mr Mudavadi said after taking into consideration the cost of fuel, pipeline and storage, a litre of petrol should go for Sh72.61.

"We have time and again cautioned against uncontrolled borrowing. Chickens have come home to roost and the government does not know where to turn or what to do," Mr Mudavadi told journalists at the ANC office in Lavington, Nairobi, on Tuesday.

"The government is taxing poverty to pay for stolen funds."

Mr Mudavadi proposed the reduction of VAT to 12 per cent and efficiency in the use of public funds.


He also asked the government to negotiate for flexible loans with longer grace periods, low interest rates and a longer time to pay as a way of addressing the Sh5 trillion national debt.

"It has been proved that the higher the taxes, the higher the propensity to evade them. It is even worse when Kenyans are being taxed so heavily to pay for corruption," he said. "Kenyans want to see those who contributed to the current mess punished."

He added that the petroleum and energy industries "are all rotten".

"The new petroleum levy would be unnecessary if those given the responsibility to manage institutions that oversee and regulate the energy industry performed their work with integrity and accountability. Appointments to these offices are largely political," Mr Mudavadi said.


And as he spoke, Orange Democratic Movement leader Raila Odinga separately held talks with former MPs Peter Kenneth (Gatanga) and Zakayo Cheruiyot (Kuresoi) on the cost of fuel and political developments in the country. Mr Odinga said concerns about the high cost of fuel touching other areas of the economy are legitimate.

He said the new tax could lead to food inflation and demands for more pay by workers.

"The challenge is to find ways of balancing between the need to raise money to run the country while protecting vulnerable Kenyans," Mr Odinga said in a statement to newsrooms.

Mr Mudavadi asked the Directorate of Criminal Investigations to take action against individuals running down Kenya Pipeline Company.

He said the construction of 10 billion pumping stations at a cost of Sh4.9 billion and the Sh48.4 billion KPC Line 5 project was not necessary.


On the value automation projects, whose cost rose from Sh1.2 billion to Sh5.1 billion, Mr Mudavadi urged the DCI to find out if the contract was split, and if the scope of works was changed midstream.

"We demand that these matters be investigated, answers given and the culprits prosecuted," he said.

He also told DCI to question the cost of Sinendet-Kisumu pipeline, and why a particular "high-ranking Cabinet Secretary was heavily involved in making decisions".

Meanwhile, governors have said the implementation of the 16 per cent tax on fuel is likely to renew the incessant clamour for higher pay by workers.

According to Council of Governors chairman Josphat Nanok, this will adversely affect the country's development.


The Turkana Governor asked President Kenyatta to assent to the amendments on the 2018 Finance Bill, which seek to extend the implementation of the law to 2020.

He said the government should carefully assess the impact of its actions.

"Services in counties will be affected. Employers will bear the brunt of this increase on the fuel levy," Mr Nanok said.

"I call upon the government to review the 16 per cent VAT on petroleum products as it will slow down the momentum of economic growth already experienced and to a very large extent make investors shy away from injecting resources in our economy."

He said the new levy means the tax burden weighs even heavier on fuel prices, in effect triggering a rise in the prices of basic commodities and on transport.

Additional reporting by Kennedy Kimanthi

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