The Kenyan government is exploring changes to the value-added tax (VAT) on fuel to shield Kenyans from rising costs if tensions in the Middle East continue to push up global prices, Treasury Cabinet Secretary John Mbadi has revealed.
Speaking while appearing before the National Assembly Departmental Committee on Finance and National Planning on Thursday, April 2, Mbadi disclosed that the government is now considering shifting VAT on fuel from an ad valorem system, where tax is charged as a percentage of value, to a specific tax model that imposes a fixed amount per liter.
Mbadi Says Govt Seeks VAT Review on Fuel
The CS said the proposal, once finalized, will be tabled in Parliament for approval as part of broader fiscal interventions aimed at price stability.
“To stabilize the prices to zero shillings, I would wish to report that the Ksh17 billion is not sufficient. We are considering changing VAT from Ad valorem to specific so we do not lose the revenue we had factored into the budget. This means we will charge a specific amount on VAT pending Parliamentary approval,” Mbadi said.
“That is a possibility for the moment. I’ve indicated that we are likely to adjust it, and we will present a proposal on how it is currently applied to specific areas. If we feel this is inadequate going forward, we may consider revising the VAT percentages to manage costs and ensure that prices do not rise too high, given the limited fuel cover.”
Also Read: Why Fuel Prices Will Hit Ksh 250 – Moses Kuria
The CS stated that any adjustment to VAT would aim to stabilize fuel prices while ensuring a steady and reliable supply of petroleum products across the country.
Under the current system, Super Petrol in Nairobi retails at Ksh178.28 per liter, with 16 percent VAT adding about Ksh28.52 to the pump price. Diesel at Ksh166.54 carries Ksh26.65 in VAT, while kerosene at Ksh152.78 includes Ksh24.44 in tax.
Mbadi emphasized that the government is keen to ensure fuel prices do not rise disproportionately, especially amid uncertainties caused by the ongoing Middle East conflict, which continues to disrupt.
Also Read: Fuel Crisis in Africa: How Top 10 Economies on the Continent are Coping with Middle East War
Treasury CS Says Pump Prices to Stay Put for At Least Two Months
According to Mbadi, Kenya has 16 days’ worth of petrol stocks, 19 days’ worth of diesel, and 49 days’ worth of kerosene, despite the impact of the war in Iran on global oil prices.
He stated that the government is taking active measures to maintain a consistent, reliable supply of petroleum products in collaboration with contracted oil marketers and suppliers under the government-to-government (G-to-G) arrangement.
CS Mbadi noted that the supply chain is unlikely to experience major disruptions, ensuring accessibility and adequate fuel availability across the country.
He further urged Kenyans to stop speculating on fuel prices, warning that such actions could distort the market.
“We are the ones distorting petrol prices in this country, and the government is doing everything to ensure pumps are filled, and prices are affordable,” Mbadi said.
“It is a difficult time worldwide; almost all countries have seen prices rise by 30 percent. Even if prices increase here, we will use mechanisms to stabilize them. There is no need to speculate, no need to panic. We are in charge.”
