The Kenya Revenue Authority (KRA) has lost KSh 9.1 billion in revenue following the implementation of a government directive to lower fuel prices.
In a statement on June 4, KRA said the loss was recorded between April and May 2026 after the reduction of Value Added Tax (VAT) on fuel from 16% to 8% as part of measures to cushion consumers from rising global fuel costs.
“Kenya Revenue Authority (KRA) has forgone KSh 9.1 billion in tax revenue between April and May 2026 following the reduction of Value Added Tax (VAT) on fuel from 16% to 8% as part of measures aimed at cushioning consumers from rising global fuel prices,” read part of the notice.
KRA Gives Up Sh9.1 Billion in Fuel Tax Cuts After VAT Reduction
The tax agency told the Senate Standing Committee on Energy that the intervention was intended to ease pressure on households and businesses grappling with high fuel prices driven by international market fluctuations.
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KRA Commissioner for Customs and Border Control Lilian Nyawanda said the temporary tax relief was necessary to stabilize the market and ensure continued access to affordable fuel across the country.
At the same time, Nyawanda addressed concerns surrounding a consignment of Premium Motor Spirit (PMS) transported by the vessel MT PALOMA, which has attracted public and parliamentary scrutiny.
Nyawanda clarified that the fuel cargo in question was re-shipped to other markets and did not enter the Kenyan market. The consignment remains under investigation.
She further explained that all related customs entries have since been canceled. However, taxes totaling KSh 5.1 billion had already been paid by various Oil Marketing Companies through the primary importer associated with the shipment.
According to KRA, the collected taxes will not be refunded but will instead be offset against future fuel import declarations by the affected companies.
Nyawanda emphasized that KRA’s role in the petroleum supply chain is limited to customs clearance, tax assessment and collection, transit control and trade facilitation, in line with its statutory mandate.
KRA noted that imported fuel products are cleared only after approval by the relevant Partner Government Agencies, which are responsible for conducting mandatory quality assurance and compliance checks.
The commissioner added that the authority has enhanced systems to expedite the processing of import documentation, enabling the timely assessment and collection of duties, VAT and other statutory charges.
KRA said the measures help expedite the release of fuel imports at the Port of Mombasa and ensure smooth distribution across the country, thereby avoiding supply interruptions.
The authority added that it remains committed to supporting lawful trade, protecting government revenue, and backing efforts to stabilize fuel prices and shield consumers from changes in global oil markets.
Ruto Announcement of 8% VAT Cut for Three Months
President William Ruto announced a cut in the Value Added Tax (VAT) on fuel as part of efforts to ease the cost burden on Kenyans.
Speaking in Suneka, Kisii County, on Wednesday, April 15, Ruto said VAT would be reduced from 16% to 8% for three months.
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The President also disclosed that the government had set aside KSh 6.5 billion to help stabilize fuel prices.
Ruto explained that the measures were introduced to shield citizens from rising fuel costs.
“We have managed to moderate prices. I am announcing today here that, in response to the fuel prices that have gone up, we have stepped in as the government with KSh 6.5 billion to reduce the cost of fuel,” he said.
“We have also reduced VAT from 16% to 8% for the next three months until we ensure that we have gone through this phase.”
The Head of State criticized the opposition for calling for protests over the increase in fuel prices, arguing that the trend is global and not unique to Kenya.
He said demonstrations would not reduce fuel costs, adding that the government must instead rely on sound planning and resource allocation to manage prices and maintain sufficient fuel reserves.
The President further called on Kenyans to pray for stability in global markets, noting that conflicts in the Middle East are affecting fuel prices worldwide.
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