It does appear Kenya’s backed itself into an interesting legal tight spot, on this issue of the VAT exemption on petroleum products coming to an end. This thread will explain why.
First, the background, to bring you up to speed.
When Kenya wrote a new law on Value Added Tax, back in 2013, MPs put in a 3- year long exemption for VAT on petroleum products. That covered everything from the gas you use to cook, to the V-Power Evo & Scooby drivers love so much, to the diesel matatus choke on.
That exemption was to expire at the end of August 2016. But, there was a problem for MPs. An election was due the next year.
Key themes to remember from this point on:
[1] We love to procrastinate.
[2] We also don't like making final decisions on things we can make someone else's problem.
[1] We love to procrastinate.
[2] We also don't like making final decisions on things we can make someone else's problem.
As usual, Kenya’s Parliament opted to extend the exemption for VAT on petroleum products for 2 years, through that years Finance Bill. Remember this, because it will be a cornerstone for the argument to come later.
So, 2017 rolls along, and because of changes made to the Value Added Tax Act, Kenya has until end August 31, 2018, until the exemption for VAT on petroleum products, ends.
Now, remember, the way the Act is written, it says that the exemption ends on a specific date. In this case, 2 years from September 1 2016. After that, VAT should apply on petroleum products – LPG, gasoline, kerosene, diesel, the lot.
Now, when MPs were debating the 2018 Finance Bill, a motion to extend the exemption yet again came up, via @JunetMohamed. The house approved that amendment to 2018 #FinanceBill. MPs also passed the Finance Bill with a tonne of amendments.
But remember, until the Finance Bill has the assent of @UKenyatta, it has no force of law. It is not law.
Those exemptions, *therefore*, do not apply until that happens.
Those exemptions, *therefore*, do not apply until that happens.
Also, equally important – the Value Added Tax Act 2013, as amended through the Finance Act of 2016, is clear on when the exemption for VAT on petroleum products, ends. That would be today.
It’s been public knowledge for 2 years that this exemption was going to end now. Ideally, what should have happened is that the VAT Act should have been amended in Q1/Q2-18.
[1] make the exemption permanent
[2] remove the exemption for good
[3] kick the can down the road
[1] make the exemption permanent
[2] remove the exemption for good
[3] kick the can down the road
Even without the benefit of hindsight, an ideal time to sort this out would have been when MPs were debating the Tax Laws Amendment Bill, 2018, around Q2.
But, by leaving the matter for this long – we’ve effectively put ourselves in a corner. By law, VAT should apply from tomorrow, but there’s been no word on price adjustments from ERC, or word from State House indicating that @UKenyatta has assented to the Finance Bill.
Both, IIRC, would solve the execution problem we’re facing at the moment, one way, or another.
For reference, here's the relevant bit of the Value Added Tax Act, with the extension tacked on by the 2016 #FinanceBill. 
Statement from @KRACare on the end of the VAT exemption for petroleum products, issued September 1. @energy_ke now needs to deliver prices soon, lest OMCs get caught in a compliance mess.
