The Kenya Revenue Authority (KRA) has defended the country’s petroleum taxation framework before the Senate Standing Committee on Energy, even as lawmakers raised fresh concerns over the impact of fuel taxes and levies on the cost of living.
During the session, senators scrutinized the multiple taxes applied to petroleum products and questioned their role in driving up fuel prices in Kenya. The committee focused on fuel pricing, petroleum taxation, customs administration, transit cargo handling, and the Government-to-Government (G-to-G) fuel importation arrangement.
Tana River Senator Danson Mungatana challenged KRA officials on the structure of the nine taxes and levies imposed on fuel, asking which ones could be removed to ease prices for consumers.
“Among the nine taxes imposed on fuel, which taxes can be dropped to make fuel cheaper in Kenya?” he posed, further questioning why government interventions have largely focused on Value Added Tax (VAT) reductions rather than other components of the fuel tax structure.
Siaya Senator and Senate Energy Committee chair Oburu Oginga also pressed for clarity on the government’s approach, asking why tax relief measures have concentrated on VAT instead of a broader review of all fuel-related taxes and levies.
Responding to the concerns, Kenya Revenue Authority Commissioner for Customs and Border Control Dr. Lilian Nyawanda said VAT was chosen because it offers the quickest legal and administrative mechanism for adjusting fuel prices.
“The Cabinet Secretary had a leeway to reduce the VAT and that is why he was quick to reduce it as the low-hanging fruit,” she told the committee.
She explained that VAT is calculated on the customs value of imported fuel, while excise duty is charged based on volume, making VAT easier to adjust in response to price shocks.
The Kenya Revenue Authority further disclosed that it had foregone approximately KSh9.1 billion in revenue between April and May 2026 following the reduction of VAT on fuel from 16 per cent to 8 per cent. The move, it said, was aimed at cushioning consumers and businesses from rising global oil prices and market volatility.
The committee also sought clarification on the controversial MT PALOMA fuel consignment. Dr. Nyawanda stated that the cargo did not enter the Kenyan market and was instead redirected to other destinations. She added that related customs entries had been cancelled, with taxes amounting to KSh5.1 billion to be reconciled against future consignments.
KRA emphasized that its role in the petroleum supply chain is strictly limited to customs administration, tax assessment, levy collection, transit monitoring, trade facilitation, and cargo clearance. It noted that it is not involved in fuel procurement decisions, which are handled by other government agencies.
The authority also called for stronger integration of government systems and improved inter-agency coordination to enhance transparency and accountability within the petroleum importation and distribution chain.
