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IMPACT OF 16% VAT ON PETROLEUM PRODUCTS IN KENYA

Lets start this story with an analogy of how a motorbike operator will be affected. I have named it the Economics of a Boxer 150 motorbike.

The bajaj boxer 150 covers 48.6 km for every 1 liter of Petrol. This means a full tank will cover 534 km.

Before,

Full tank = 1,100/=

Now,

128 *11 = 1,400/=

Boda Boda people will be spending an additional 300/= more than what they used to spend before the Introduction of 16% VAT by the Cabinet Secretary for National Treasury.

Parliament tried to suspend the 16% Value Added Tax (VAT) which would have saved bodabodas approx 300 on every full tank. But the CS Treasury said that that suspension on VAT has no impact the prices have just shot to Ksh. 128 per liter for Petrol as if there was no opposition to the proposals at the August House. Is this a show of mighty?

Is the CS above the law? Why can’t he listen to the men and women (Taxpayers) who pays his salary every month? What happens when one disobeys order from the boss?

Further problems,

1. Car wash
As moto cyclists we will spend even more on washing the bike. Initially,we used to spend Ksh. 100 at the car wash.

We are sure this amount will increase because those wash boys use pressure pumps some of which use petrol.

Since some of us use paraffin at home, It means that our life will further be oppressed from that angle. The price of paraffin will increase further to accommodate that new Tax.

2. At Mama Mboga
Vegetables which we buy from Mama mboga will be more expensive because when mama wakes up at 4:00 am to go to the Market.

This means she will pay more in form of transport which I am 100% will be transfered to us at the selling point (kibanda) in our estate.

Since Vegetables will be more expensive, we will not have a variety to choose from as it was in the past. We won’t choose whether to eat managu, saga, murenda or sukuma week.

We will have to stick to Sukuma week every day. We’ve limited options on this matter.
3. Price of Milk

The price of milk will also likely shoot because large scale daily famers use machine to process animal feeds and milk cows in large scale. Transporting milk to the cooperative or milk procesor and Transportingprocessed milk will help shoot the price to the ceiling. It seems if we take this angle every commodity will be more expensive going forward.

4. Events

Large Events will be more expensive hence we will be forced to pay more in form of tickets to attend these Events.

5. Hospitals

There are a number of machines at our hospitals which make use of life-saving machines and equipments such as ICU and children nurseries which use generators for emergency power These generators make use of diesel to run. Who will bear the extra cost of operating these machine? I can see Out of Pocket (OOP) spending shooting to the moon.

Kenya’s healtcare referral system depends on ambulances and some light aircraft to deliver patients who need urgent medical care to Kenyatta National Hospital, Nairobi Hospital, MP Shah among others. This will be extra spending by patients. Are we going to enjoy Universal HealthCoverage as promised in the Big FourAgenda?

Transport of medicine to health facilities will also bear the cost of increased fuel price due to Introduction of 16% VAT. This must be refleced in the Market price.

6. Cost of education

For students who travel to and from School, life will be unbearable after the VAT will be unbearable.

I am sure School buses will be more expensive, parents will have to pay more in order to continue using this School bus service. Students may have to walk to School as we do in the rural areas or use

This means she will pay more in form of transport which I am 100% will be transfered to us at the selling point (kibanda) in our estates.

Ways of overcoming the challenges brought on by Introduction of 16% VAT on Fuel
Parents, pupils, Civil servants, teachers, lawyers, priests, pastors, juakali artisans and everyone else should resort to riding biycles or walking to your destination to legally avoid paying Taxes. This has happened for ages for instance, if you do not want to pay Taxes on cigarettes you have to stop smoking. This is why governments and employers should provide housing near their workplaces. Reasonable distances where people can walk or cycle. For instance, can one cycle from Rongai to industrial area? I DOUBT IT.

In fact, if we walk or cycle to School, work, mosque, church, Temple or Market as a nation we will achieve better outcomes in our overall wellbeing. We will have fewer cases of overweight or obese people, cases of high blood pressure will decline and even diabetes will be reduced significantly. These are called lifestyle disease which are very common in cities and urban areas around the world although recently it has been spreading into rural areas. If we walk or cycle, we will not have to spend money in the gyms sweating it out on the thread mill or running every morning to keep fit or lose weight. This will also reduce our expenditure on healtcare services.

The challenge to cycling and walking is that the roads are not conducive. There are no non-motorable roads out there to make this dream come into realty but we are thinking about it. There are no pedestrianor or or bicycle sections on most Kenyan roads.

This makes it quite dangerous to cycle or walk to work.

In conclusion, the Motorists Association of Kenya has called for peaceful demonstrations against skyrocketing fuel prices in Kenya caused by Introduction of 16% VAT on petroleum Products.

After the CS said that parliament suspension will have no effect, Orange Democratic Party Members of Parliament issued 72 hour ultimatum for the CS to stop the Taxes or else they can Institute a censure motion to sack the CS for national treasury.

 

Thank you for reading.

 

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Editor-in-Chief

Geoffrey Kerosi is a prolific economics writer and an avid reader in economics, finance, business, politics and technology. He holds bachelors' Degree in Economics and Statistics from Kenyatta University. He has over 4 years of extensive experience working as a Policy researcher and Budget Analyst for Civil Society in Kenya. Contact: Email: geoffrey.kerosi@gmail.com Phone: +254 713 639 776 (Whats-app only) Twitter: @gkerosi

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