Treasury is set to collect sh17 billion monthly from the reduced VAT on fuel, following Presidential directive in his memorandum to Parliament.
It had been expected that that it would collect sh35 billion when the levy was at 16 per cent, but its reduction by half means that government will need austerity measures to cut expenses.
Consumers will see price of super petrol drop from sh127 to about sh118, and the price of diesel will drop from sh115 to about sh107.
While addressing the public on his decision not to sign the Finance Bill to scrap it, President Uhuru Kenyatta said the Constitution, infrastructural projects have increased expenditures that compel Kenyans to fund them.
“The purpose of this 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”, said the President.
The Speaker of the National Assembly Justin Muturi has already convened a special sitting next week for MPs to consider the memorandum. The legislators are expected to approve the President’s proposals as they would need a two thirds majority to scrap it all together, a number and decision which the House has never achieved under the Jubilee government.
The President also said he has proposed cuts on essential spending on hospitality, foreign and domestic travel, training and seminars, and similar categories.
The VAT on fuel was meant to reduce budget deficit.
In the financial year 2017/18, the government borrowed an average of sh52.67 billion monthly, according to data from the National Treasury. The cumulative borrowing over the period was sh632 billion pushing the country’s overall debt to sh5.04 trillion from sh4.41 trillion as at June 2017.