Preamble 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.
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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.
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Clause 2 Amendment of section 198 of the Energy Act (No.1 of
2019)
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Insertion: The Bill proposes to introduce additional requirements
relating to the power of the Cabinet Secretary to make regulations
by inserting the following:
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The CS may by notice in the Gazette amend the Sixth Schedule
(which is a proposed schedule to the Energy Act, 2019);
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The Notice to amend the Sixth Schedule shall be laid before the
National Assembly within 7 days of its publication; and
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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
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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.
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Clause 3 Amendment of section 224 of the Energy Act (No.1 of
2019)
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Insertion: 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.
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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.
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Clause 4 Insertion of a New Schedule to the Energy Act, 2019
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Insertion: The Bill amends the Energy Act, 2019 by introducing a new
schedule immediately after schedule five to the Act.
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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.
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Clause 5 Amendment of section 10 of the Excise Duty Act, 2015
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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.
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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.
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Clause 6 Amendment of Schedule 1 to the Excise Duty Act, 2015
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Insertion: 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;
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Gas oil (automotive, light, amber for light speed engines);
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Diesel oil (industrial heavy, black, for law speed marine and
stationery engines).
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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.
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Clause 7 Amendment of section 2 of the Petroleum Development
Fund Act, 1991
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Insertion: 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.
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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.
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Clause 8 Amendment of section 3 of the Petroleum Development
Fund Act, 1991
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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:
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Prescribing the specific amount of levy to be paid on all
petroleum fuels in accordance with the tariff code provided in
the 1st Schedule;
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States that the levy shall be paid to the Petroleum Development
Fund (the ‘Fund’);
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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;
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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;
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Providing that the collector shall to the Fund all the levy
collected during the month;
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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;
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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
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Introducing a penalty for failure of the levy remitter to comply
with the above provisions.
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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.
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Clause 9 Amendment of section 4 of the Petroleum Development
Fund Act, 1991
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Deletion & Substitution: The Bill amends section 4 of the Act by
introducing additional use of the monies in the Fund being:
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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.
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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.
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Clause 10 Amendment of the Petroleum Development Fund Act,
1991 by insertion of section 4A Section 5(b)
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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:
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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
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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.
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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.
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Clause 12 Revocation of PDL Orders, 2020 |
Deletion: The Bill proposes to revoke the Petroleum Development Levy
Orders issued by the CS in 2020.
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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.
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Clause 13 Amendment of Petroleum Development Fund Act, 1991
by insertion of Schedule 1
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Insertion: The Bill introduces a new schedule to the Act which
provides for the tariff code and the corresponding rates of levy in
Kenyan Shillings.
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This makes the taxes or levies payable by a remitter ascertainable
in line with the principles of efficient tax system.
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Clause 14 Amendment of section 15 of the Statutory
Instruments Act, 2013
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Insertion: 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.
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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.
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Clause 15 Amendment of section 5 of the VAT Act, 2013
5(2) (ab)
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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%.
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If passed, the amendment reduces the VAT tax burden on the consumers
of petroleum products by half.
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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.
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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.
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