Senators have questioned the Kenya Revenue Authority (KRA) over the impact of multiple taxes on fuel prices, with some lawmakers calling for tax reductions and the suspension of certain levies to ease the cost of living burden on Kenyans.

Appearing before the Senate Standing Committee on Energy, KRA officials defended the current petroleum taxation framework while outlining the agency’s role in fuel imports, customs administration and revenue collection.

The session focused on fuel pricing, petroleum taxation, transit cargo, and the effectiveness of the Government-to-Government (G-to-G) fuel importation arrangement.

Senator Mungatana challenged KRA on the nine taxes and levies imposed on petroleum products, asking which taxes could be eliminated to make fuel cheaper for consumers.

“Among the nine taxes imposed on fuel, which taxes can be dropped to make the fuel cheaper in Kenya?” he asked.

The senator further questioned why the government had only targeted Value Added Tax (VAT) when addressing fuel prices.

“He further added that the minister has the power to vary the VAT on fuel. We want to know if we can give the minister powers to vary the other eight taxes on petroleum products,” he said.

Senate Energy Committee Chairman, Siaya Senator Oburu Oginga echoed the concerns, questioning the government’s approach to tax relief.

“Why did the government target VAT only instead of reducing all the nine taxes and levies by a small margin?” he asked.

Responding to the concerns, Dr. Lilian Nyawanda, Commissioner for Customs and Border Control at KRA, said the Cabinet Secretary had limited flexibility under existing law.

“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 senators.

Dr. Nyawanda explained that VAT and excise duty are calculated differently, noting that VAT is charged based on customs value, which includes the cost of the product, freight and insurance, while excise duty is imposed according to the volume of petroleum products imported.

Senator Veronica Maina sought clarification on the timing of tax collection, asking whether levies are imposed before or after fuel is released into the local market.

The hearing also turned to the controversial issue of contaminated fuel delivered aboard MV Paloma. Senator Boni Khalwale demanded accountability, asking KRA how much revenue the authority collected from the shipment.

Khalwale further proposed the temporary suspension of the Railway Development Levy and Road Maintenance Levy until economic conditions improve.

“We should stop railway and road maintenance levy until when the economy improves and the Iran-USA war ends,” he said.

Senator Ogolla questioned the economic benefits Kenya derives from fuel destined for neighbouring countries and sought an explanation for fuel price disparities within the East African region.

“How does the country benefit from transit cargo that goes to neighbouring countries?” she asked.

The senator further questioned why fuel remains cheaper across Kenya’s borders, arguing that lower energy costs make neighbouring countries more attractive destinations for investors.

Senator Kisang sought projections on the fiscal implications of reducing fuel taxes, asking KRA to estimate the revenue losses that would result from lowering VAT from 16 per cent to 8 per cent or introducing a zero-rated regime for petroleum products.

In her response, Dr. Nyawanda defended KRA’s systems and procedures, saying the authority works closely with the Kenya Pipeline Company (KPC) to monitor petroleum movements and ensure taxes are properly accounted for.

“KRA and KPC systems are integrated to ensure seamless taxation,” she said.

However, she acknowledged challenges in monitoring the increasingly complex fuel supply chain.

“We cannot be able to tell if the fuel is under Government-to-Government arrangement or not,” she said.

Dr. Nyawanda attributed some of the difficulties to the large number of stakeholders involved in the sector.

“We have so many players in the fuel market that makes it convoluted and hard to implement the integrated fuel system,” she told the committee.

In its submission, KRA maintained that its mandate is limited to customs administration, tax assessment and cargo clearance. The authority said petroleum imports are processed through the Integrated Customs Management System (iCMS), with taxes and levies collected before products are released for local consumption.

KRA also recommended enhanced integration of government systems and stronger reporting obligations among agencies involved in the petroleum supply chain. According to the authority, improved data sharing would strengthen accountability, transparency and operational efficiency within the sector.

The Senate committee is expected to compile recommendations after hearing submissions from KRA and other stakeholders as lawmakers seek solutions to persistent concerns over fuel pricing, taxation and petroleum supply management in Kenya.