MPs yesterday approved Junet Mohammed’s proposal to postpone the implementation of the fuel tax introduced under the Finance Bill 2018. The 16 per cent Value Added Tax on fuel, which was supposed to be implemented on September 1, will now take effect in two years. This takes the pressure off consumers who would have had to pay more than Sh130 for a litre of petrol.
The MPs argued that the intention to implement the fuel tax was similar to overtaxing Kenyans who are already overburdened.
The members also noted that the cost of commodities was likely to rise by over ten per cent if the fuel tax was implemented while transportation costs would grow by more than 20 per cent.
Although the postponement is a relief to the consumers, the budget will suffer a deficit of Sh71 billion which means that the Treasury will have to look for another source of revenue to fill this gap or absorb more debt.
Housing Levy Rejected
The National Assembly also turned down the proposal to deduct 1.5 per cent from salaries to finance the government’s housing project. This will negatively impact the government’s plan to build half a million houses under the Big Four agenda. The housing levy was initially set at 0.5 per cent but was increased to 1.5 per cent.
The Finance Bill 2018 also contained a proposal to create a National Housing Development Fund to be financed by employers and employees.