High fuel prices will greatly dent economy

It is likely to obliterate all the gains the economy stood to realise this year.

IN SUMMARY

  • Introducing that levy was tantamount to double taxation, which defies economic principles.
  • And the government has to look for other alternatives to manage the economy, particularly cut costs and manage resources prudently.

Advertisement

The new levy on petroleum products has precipitated a severe fuel shortage that threatens to grind the economy to a halt.

Desperate motorists are forced to travel for long distances and queue for hours to fuel at the few outlets still operating.

Clearly, we have a major crisis that the government cannot wish away.

But this is just the tip of the iceberg; the full impact is still to be felt and, for sure, will be excruciatingly painful.

Things cannot continue like this and it is incumbent on the government to act quickly to avert an economic crisis.

CRUCIAL MEETING

Two things happened yesterday. One, the High Court, sitting in Bungoma, issued a temporary order stopping implementation of the 16 percent value added tax.

Two, National Treasury Cabinet Secretary Henry Rotich met National Assembly Speaker Justin Muturi and the House leadership in an attempt at resolving the crisis. But these did not resolve the matter.

Mr Rotich was cagey, only proffering that a solution will be arrived at soon.

He and his team did not seem to appreciate the enormity of the problem at hand.

They are not taking the matter seriously, yet it is fraught with perils. It is likely to obliterate all the gains the economy stood to realise this year.

DOUBLE TAXATION

We have argued on several occasions that the law that introduced VAT on petroleum was ill-conceived.

The products are ordinarily heavily taxed even without the VAT. Introducing that levy was tantamount to double taxation, which defies economic principles.

Fundamentally, we have seen the high fuel costs beginning to adversely affect the other sectors of the economy.

Public transporters have raised fares while manufacturers have issued notices to increase commodity prices.

Maize millers, for instance, have announced plans to increase prices to cope with the high fuel costs.

FINANCE BILL

Many other sectors are bound to follow suit — raise prices to survive. And it is the ordinary citizen, the consumer, who has to bear the burden.

A heavy tax burden is a recipe for social chaos. Pushed to the wall, citizens may be forced to revolt against the punitive costs arising from exorbitant fuel prices.

Constitutionally, it is President Uhuru Kenyatta who can salvage the situation by assenting to the recently published Finance Bill 2018 that was passed by Parliament last week and whose objective is to reschedule the implementation of the VAT till 2020.

But he is still away. Nonetheless, we believe there are administrative actions that can be enforced contain the situation.

Ultimately, the new levy has to go if we are to stabilise the economy.

And the government has to look for other alternatives to manage the economy, particularly cut costs and manage resources prudently. Citizens just cannot bear this tax burden any longer.

More From Daily Nation
This page might use cookies if your analytics vendor requires them. Accept