Nairobi, Kenya – (African Boulevard News) – Kenyan MPs have voted to double the value-added tax (VAT) on fuel from the current rate of 8% to 16%, a move which is expected to add to the country’s rising cost of living. The vote, which was passed in the national assembly on Thursday, saw parliamentarians approve the measure by a large majority of 234 votes to 102.
The tax hike comes amid growing concerns about the country’s fiscal deficit, which has widened significantly in recent years. Despite efforts to cut spending and increase revenue, the government has been struggling to reduce its budget shortfall, which is now projected to reach 8.9% of GDP this year.
The move has been welcomed by some industry experts, who argue that the higher taxes will help to improve the government’s fiscal position and reduce the budget deficit. However, others have warned that the increased costs could have a negative impact on the economy, particularly for low-income households.
According to John Muchira, a senior analyst at Nairobi-based brokerage firm, AIB Capital, “the proposed tax increase will make life even more difficult for ordinary Kenyans who are already struggling with high food and fuel prices. It will also hurt businesses, which are already facing challenging operating conditions due to the COVID-19 pandemic.”
The vote comes just days after the government announced its intention to increase taxes on mobile money transactions, a move that has also been met with widespread criticism. Both measures are part of a broader effort to raise revenue and reduce the country’s fiscal deficit, which has been exacerbated by the COVID-19 crisis.
Despite concerns about the impact of the tax hike, the government has defended the move, arguing that it is necessary to reduce the country’s reliance on borrowing and to ensure a stable and sustainable fiscal position. Speaking after the vote, National Treasury Cabinet Secretary, Ukur Yatani, said, “We are confident that this measure will help us to address the fiscal challenges that our country is facing and put us on a path towards sustained economic growth and development.”
The higher taxes will take effect immediately, with consumers expected to see higher fuel prices at the pump within a matter of days. It remains to be seen how the move will be received by ordinary Kenyans, who are already struggling to cope with the impacts of the COVID-19 pandemic and high inflation.
