TAX NEWS - JUNE 2010

Kenya Tax: Zero tax on cooking gas cylinders to save forests, say players

Kenya is facing a serious deforestation problem even as many people cannot afford liquefied petroleum gas (LPG). The result has been an overdependence on firewood and charcoal as sources of energy, especially in rural areas.

Marketers are anxiously waiting for the reading of the Budget to see whether the government will lift taxes on gas cylinders and other accessories to promote the use of the efficient energy source.

The Petroleum Institute of East Africa (PIEA) said after waiting a long time to do so, the Finance ministry needs to remove the import duties and value added tax (VAT) from LPG appliances (cookers, cylinders and accessories) in this year's Budget.

"This will complement efforts to protect endangered forest cover by making gas more affordable. It will increase its consumption and reduce dependence on charcoal and wood fuel," said the institute's general manager Wanjiku Manyara.

Initial investment in cylinders, cookers and related components is high as the government levies 16 per cent value added tax (VAT) and 25 per import duty on them, so fewer than 10 per cent of Kenyans use gas for cooking.

Despite the removal of value added tax (VAT) in 2004 and the common external tariff on gas in 2005, Kenya's per capita consumption of 1.5 kilogrammes lags behind that of Senegal at 12.2 kilogrammes which is highest in sub-Saharan Africa.

According to the National Oil Corporation of Kenya (Nock), removal of taxes will make it easier for first-time purchasers to buy cylinders and accessories.

Cooking gas is marketed by Nock, Total, KenolKobil, Oilibya, Shell, BOC, Addax and Pan African Petroleum in cylinders fitted with standardised valves so consumers can obtain refills from any dealer or retailer.

Marketers have through PIEA in the past proposed that LPG be made a social product by exempting it from taxation. The government is yet to honour the request.

"Tanzania does not charge duty or value added tax (VAT) on cylinders. It implemented an approved East Africa Community (EAC) protocol that requires LPG cylinders and appliances to have zero import duty and VAT," said Mr Wanjiku.