The Petroleum Products’ (Taxes and Levies) (Amendment) Bill, 2021

Proposed Provision for Amendment Proposed Amendment Our Comments

The long title

The Bill proposes to introduce an amendment act to amend various petroleum products’ taxes and levies related laws, restructure the management of Petroleum Development Fund, and ensure all regulations relating to taxes whether negative or positive are approved by the National Assembly. The Bill seeks to review taxes and levies on petroleum products with a view of making the products cheaper by reducing the taxes and levies applicable to petroleum products.

It further seeks to restructure the Petroleum Development Levy by clearly providing for the manner and the purposes for which the funds shall be administered and used as opposed to be being under the discretion of the Cabinet Secretary (CS) in charge of Petroleum & Mining.

Finally, the Bill clips the CS’ powers to discretionary review of taxes and levies upwards or downwards without the approval by the National Assembly.


Clause 2

Amendment of section 198 of the Energy Act (No.1 of 2019)


The Bill proposes to introduce additional requirements relating to the power of the Cabinet Secretary to make regulations by inserting the following:

  • The CS may by notice in the Gazette amend the Sixth Schedule (which is a proposed schedule to the Energy Act, 2019);
  • The Notice to amend the Sixth Schedule shall be laid before the National Assembly within 7 days of its publication; and
  • The National Assembly shall, within 28 siting days from the date of Gazette Notice to amend the Sixth Schedule, consider the proposed amendments and make a resolution either to approve or reject the amendments in the notice.
  • The business name
  • Concise description of the true nature of the business
If passed, the amendment divests the CS of the discretionary powers to determine the pricing of the petroleum products, pipeline tariff, delivery rates and bridging rates, and x-factor, maximum allowed operational losses, and maximum allowed margins, and places them under the scrutiny of the National Assembly.

Clause 3

Amendment of section 224 of the Energy Act (No.1 of 2019)


The Bill proposes to amend section 224 of the Act by inserting subsection (3) revoking the Energy (Petroleum Pricing) Regulations, 2010 as amended in 2012.

The revocation removes petroleum pricing from the vagaries of the Committee on Delegated Legislation together with the CS for Energy and places it under Schedule Six to the Energy Act, 2019 where the National Assembly shall make and exercise foresight over petroleum pricing.

Clause 4

Insertion of a New Schedule to the Energy Act, 2019


The Bill amends the Energy Act, 2019 by introducing a new schedule immediately after schedule five to the Act.

The amendment brings the pricing of petroleum products, pipeline tariff, delivery rates and bridging rates, and x-factor, maximum allowed operational losses, and maximum allowed margins under the purview of the National Assembly instead of the Committee on Delegated Legislation or the CS.

The CS will, therefore, have no powers to determine, through regulations, the pricing and rates without the approval of the National Assembly as provided under the proposed section 198(3), (4) and (5) of the Act.


Clause 5

Amendment of section 10 of the Excise Duty Act, 2015

Deletion and Substitution:

The Bill proposes to delete the requirement for the Commissioner with the approval of the CS to adjust specific rates of excise duty every year and substitute it with adjustment of excise duty rates every two years.

This would increase the period within which the Commissioner for Domestic Taxes in liaison with the Cabinet Secretary for Energy may adjust the rates for excise duty to consider the inflation.

Every time rates are adjusted, the fuel prices spike, hence increasing the adjustment period from one to two years minimises tax increments and the fuel prices remain stable for the duration.


Clause 6

Amendment of Schedule 1 to the Excise Duty Act, 2015



The Bill seeks to insert a proviso to paragraph 2(1) of the First Schedule to exclude the rates of excise duty for following petroleum products from being adjusted every financial year:

  • Motor spirit (gasoline) premium;
  • lluminating Kerosene;
  • Gas oil (automotive, light, amber for light speed engines);
  • Diesel oil (industrial heavy, black, for law speed marine and stationery engines).
These are the commonly consumed petroleum products available in every household in Kenya. Excluding them from being adjusted every financial year, therefore, protect the citizens from the tax burden that comes with the tax rates adjustment.

Also, the amendment inadvertently removes the powers of the Commissioner in liaison with the CS to adjust the excise duty rates for these products and confers the authority on the National Assembly.

It is, however, not clear from the wording of the Bill whether the tax rates for these products will indefinitely not be adjustable.


Clause 7

Amendment of section 2 of the Petroleum Development Fund Act, 1991


The Bill introduces new definitions in the Act in the following alphabetical order:

“Authority” means the Energy and Petroleum Regulatory Authority established under the Energy Act, 2019;

“Cabinet Secretary” means the CS for the time being in charge of Petroleum; and

“Levy” means the Petroleum Development Levy established under section 3 of the Act.

The new definitions provide clarity. It differentiates between the CS for Energy and CS for Petroleum since the two could confuse the actors in the energy sector because petroleum falls under the class of products included in the statutory definition of energy.

Clause 8

Amendment of section 3 of the Petroleum Development Fund Act, 1991

Deletion & Substitution:

The Clause proposes to commute the role of the Cabinet Secretary to make a petroleum development levy order by deleting and inserting the following:

  • Prescribing the specific amount of levy to be paid on all petroleum fuels in accordance with the tariff code provided in the 1st Schedule;
  • States that the levy shall be paid to the Petroleum Development Fund (the ‘Fund’);
  • Providing that the oil marketing companies shall be a levy remitter, must register with a collector, and pay levy immediately upon importing any petroleum fuel;
  • Obligating the commissioner to keep record of the companies that pay the levy and submit the monthly return of the payment of levy to the CS;
  • Providing that the collector shall to the Fund all the levy collected during the month;
  • Providing that an unpaid levy shall be summarily collected as a civil debt by the commissioner in the event a levy remitter fails to comply;
  • Providing that non-compliance shall be subject to a fine amounting to 5% of the unpaid amount monthly and recurs for the duration the dues remain unpaid; and
  • Introducing a penalty for failure of the levy remitter to comply with the above provisions.

The amendment removes the ambiguity and the uncertainty associated with the petroleum development levy. It provides for simple and clear procedures for collecting the levy and the attendant penalty for non-compliance. The Act had left it to whims of the CS who created mandatory obligations upon which penalties could arise.


Clause 9

Amendment of section 4 of the Petroleum Development Fund Act, 1991


Deletion & Substitution:

The Bill amends section 4 of the Act by introducing additional use of the monies in the Fund being:

  • The stabilisation of local pump prices in instances of spikes occasioned by high landed costs above a threshold determined by the authority.

It also empowers the CS to request the administrator of the Fund for a draw down from the Fund to stabilise local petroleum pump prices when necessary.


If passed, the amendment cushions the common citizens from the high prices associated with the rise in the global petroleum prices. The funds will be granted as a subsidy when the global fuel prices shoot up or when there is need to upgrade the infrastructure in the energy and petroleum industry.


Clause 10

Amendment of the Petroleum Development Fund Act, 1991 by insertion of section 4A


Section 5(b)


The Bill proposes to introduce a new section 4A which create a Petroleum Development Fund Advisory Board.  Subsection (2) states that the Advisory Board shall be unincorporated and shall comprise of:

  • One person appointed by the CS for Finance; one person appointed by the CS for Energy; and one person appointed by the CS for Petroleum & Mining; one person representing the Authority.

Subsection (3) provides for the functions of the Advisory Board as follows:

  • Approves withdrawals out of the Fund; and
  • May impose conditions on the use of any expenditure authorised and may impose any reasonable prohibition, restriction, or any other requirement on the use of such expenditure.
The creation of the Advisory Board reinforces the management of the Fund. It enhances the division of roles since it separates administrative functions from the supervisory powers. It clips the administrator of the powers to exercise oversight over the uses of the fund and transfer them to the Advisory Board.

This is important because in the past the administrator, who is appointed by the Treasury, had funded projects outside the scope of usage of the Fund specified in the Act.


Clause 12

Revocation of PDL Orders, 2020



The Bill proposes to revoke the Petroleum Development Levy Orders issued by the CS in 2020.

The amendment would simply replace the Petroleum Development Orders as issued by the CS with the prescribed levy and their corresponding tariffs codes provided in the First Schedule to the Act.

Clause 13

Amendment of Petroleum Development Fund Act, 1991 by insertion of Schedule 1



The Bill introduces a new schedule to the Act which provides for the tariff code and the corresponding rates of levy in Kenyan Shillings.

This makes the taxes or levies payable by a remitter ascertainable in line with the principles of efficient tax system.

Clause 14

Amendment of section 15 of the Statutory Instruments Act, 2013


The Bill proposes to introduce a provision under the statutory instruments Act which requires all regulations containing provisions dealing with taxes, levies, or fees, or has the effect of imposing a charge on the public or fund or variation or repeal of any such charge to be tabled before the National Assembly within twenty-eight sitting days from the date of receipt of notice under section 11 of the Act.

This would make any regulations relating to taxes, levies, or fees to be mandatorily approved by the National Assembly before they become effective.

Although the Statutory Instruments Act already has provisions for scrutiny of regulations by Parliament, the amendment makes it mandatory for the National Assembly to either approve or reject it. Hence, regulations relating to taxes, levies or fees cannot become effective by default if Parliament fails to consider it within twenty-eight days.

Clause 15

Amendment of section 5 of the VAT Act, 2013



5(2) (ab)

Deletion & Substitution; and Insertion:

The Bill proposes to amend section 5(2) of the VAT Act by reducing the chargeable VAT on petroleum products listed in Part 1 Section B of the First Schedule to the Act from 8% to 4%.

If passed, the amendment reduces the VAT tax burden on the consumers of petroleum products by half.
It also seeks to insert a new subsection 5(2) (ab) which imposes a VAT of 8% of the taxable value on liquified petroleum gas including propane. Further, the amendment seeks to reduce VAT chargeable on liquified petroleum gas including propane gas which were initially zero-rated but were subjected to 16% VAT in the recently passed Finance Act, 2021.