The Kenya Revenue Authority (KRA) has impounded hundreds of trucks that transport fuel to its landlocked neighbouring countries in the past week, demanding tax arrears dating back to 2015.
KRA claimed that oil marketers and transporters have been diverting transit products into Kenya’s local market tax-free. Subsequently, more than 200 trucks loaded with export fuel destined for Uganda, Rwanda, Burundi, South Sudan and parts of DR Congo are grounded at the Eldoret and Kisumu fuel depots. This was after the KRA issued letters to transportation companies demanding taxes amounting to $7.2 million (Ksh757.6 million).
The outstanding tax demand emanated solely from KRA’s assertions which have been denied by transporters. In a report by The East African, Manager at a firm whose 30 trucks have been impounded revealed that both transport and oil marketing companies have together provided proof to KRA. They presented KRA exit notes and rotation numbers all issued at the borders for trucks which exited through Malaba and Busia, “but KRA wants to hear none of it.”
He added that the transporters have also supplied the taxman with documents from respective authorities proving the trucks entered the countries although he believes it’s “a mandate that neither falls on KRA or Kenyan business entities.”
With this new string of demands, there is a possibility of a fuel shortage amongst Kenya’s neighbouring landlocked countries, likewise an alternative route for the transportation of fuel which happens to be in Tanzania. This will inevitably threaten Kenya’s position as East Africa’s top petroleum exporter and increase the current 30 percent market share loss to its neighbour- Tanzania.
According to the Economic Survey 2019, Kenya recorded 739.800 tonnes of petroleum exports, a drop from 842.400 tonnes in 2017. The East African country has since then been taking active steps to regain the petroleum export market. However, with these new mandates and claims by the KRA, Tanzania being the main competition will see a more significant rise in fuel imports. Available data shows that in the financial year ending June 2018, Tanzania recorded 2.6 million litres in the volume of transit products, a 35 percent rise from 2 million litres in 2017.
Nevertheless, KRA has started allowing trucks to leave the depots and transport products to its neighbouring countries but the Kenyan taxman authority is still determined to recover all outstanding taxes. Reports show that most of the importers prefer dealing with Tanzania due to the authority’s efforts to comply with laws and standards in the downstream sector. The Kenyan Revenue Authority in a bid to remain at the forefront of the petroleum export market should, therefore, revise its mandates by increasing export volumes, lowering pipeline tariffs and eliminating fuel adulteration and smuggling.