President proposes 50% cut on fuel VAT;says tax must be implemented

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President Uhuru Kenyatta has warned NCPB officials after they failed to pay maize farmers
President Uhuru Kenyatta has warned NCPB officials after they failed to pay maize farmers

President Uhuru Kenyatta has proposed a 50% cut on the petroleum products VAT, which will set it at 8% from 16%, reiterating that there can be no more delay in its implementation after an earlier two-year extension was effected in August 2016. Addressing the nation from State House, President Kenyatta said should parliament accept his proposal, then the price of diesel will drop from Kshs 115 to about Kshs 107, while the price of super petrol will drop from about Kshs 127 to Kshs 118.

On Thursday, Speaker Justin Muturi had presented the Finance Bill 2018/2019 to the President, which sought to suspend the 16% fuel tax by a further two years, but he rejected it, prompting the Assembly leadership to call for special sittings next week to deliberate on the issues raised. President Kenyatta said the Finance Bill presented to him fell short of the required threshold, “It protected the status quo and sacrificed the bigger vision. It took the easy path, instead of rising to the challenges of our time. It was good politics, but bad leadership,” he said.

He said Kenyans are enjoying the new constitution, but it has come with its costs, citing the widened bureaucratic scope, devolution, and development in different areas. He reiterated that the purpose of the tax was simple, “We have to pay for the new constitutional order, and the public services on which Kenyans depend alike. These cost money. Further delay in the implementation of the tax would compromise our ability to deliver basic services to Kenyans, and to maintain the trajectory of our development.” The President has urged business owners to lower the prices of products as a result of the new proposal.

However, he said the measure will not suffice to balance the budget and he has proposed wide-ranging cuts in spending as well as austerity measures across all arms of government, “The cuts target less essential spending, such as hospitality, foreign and domestic travel, training and seminars, and similar categories,” he said.