Uganda is bracing for high fuel prices after Kenya amended its petroleum act, increasing tax on its petroleum products.
Kenya’s Finance Act 2023, which came into force on July 1, raised the Value Added Tax (VAT) on petroleum products from eight percent to 16 percent. This has increased a litre of petrol in Kenya from around Shs4, 700 to Shs5, 000; diesel from Shs4,300 to Shs4,600 and kerosene from Shs4,100 to around Shs4,400.
And now Uganda, which gets most imports coming through Kenya’s Mombasa Port, is bracing for an increase in prices of the petroleum products as well as other products.
Currently, a litre of petrol in Uganda costs around Shs5,000.
Mr Thadeus Musoke, the chairman of Kampala City Traders Association, said the cost of transporting goods from Kenya is going to go higher due to the tax changes in Kenya.
“All this is going to increase the cost of doing business in Uganda. Even the prices of some products made in Kenya are going to increase,” he said.
For instance, he said, transporting a 20ft container from Mombasa to Kampala costs around $3,000 (about Shs11 million), which is expected to increase.
Mr Stephen Asiimwe, the chairman of the Uganda Private Sector Foundation, admitted that they are nervous about Kenya’s tax changes.
“It is going to impact the cost of logistics and transport as well as those industries that use diesel to power machines,” he said.
The new law that was signed last month also introduces a 1.5% housing levy for all employees and raises the top personal income tax rate to 35%.
The tax increases are expected to raise an extra 200 billion shillings ($1.42 billion) a year
Kenya President William Ruto, while justifying the increase of taxes, said the government has to reduce borrowing. The government is struggling with a public debt of 9.4 trillion shillings ($67 billion) and is classified by the World Bank as being at high risk of debt distress.