Even as partner nations prepared to get together on Friday to debate the budgets, a proposal by Kenya to raise tax on trucks and trailers under the country’s Finance Bill 2023 has alarmed carriers within the East African Community.
The law would change the advance tax that must be paid on both passenger and commercial vehicles—but not on agricultural tractors or trailers. Beginning in January 2024, it suggests raising the advance tax to Ksh3,000 ($21.91) per tonne of load capacity per year or Ksh5,000 ($36.52) per year for trucks.
The advance tax on commercial cars has increased, which raises operating expenses. Finance ministers from all EAC partner nations were pledged to review the Bill, according to Kenya’s EAC Cabinet Secretary Rebecca Miano.
“Let’s hold our horses, as I understand this is going on across the borders; everybody is preparing a budget. EAC Finance ministers meet on Friday. You will have an idea on how these taxes are going to impact the rest of the region,” said Miano.
As the proposed law suggests raising the VAT from 8.0% to 16%, travelers from East Africa and Kenya would also have to deal with increased fuel prices.
“We would like to express strong opposition to the increase in advance tax on trucks and trailers,” said Newton Wang’oo, chairman of the Kenya Transport Association.
“As much as advance tax is treated as a tax credit, the proposed increase in advance tax would have a huge adverse impact on the cash flows of transport companies, which are already struggling due to the high cost of fuel and maintenance.”
The transporters, whose trucks travel the Northern Corridor to neighboring countries including South Sudan, Rwanda, Uganda, and the Democratic Republic of the Congo, have recommended eliminating the advance fee, claiming that doing so won’t reduce government income.
“Transport companies pay installment taxes just like other taxpayers in other sectors of the economy,” said Wang’oo.
“With Kenya Revenue Authority embracing technology and advanced systems, we propose that advance tax should actually be abolished as there are many other ways to ensure all transporters are in the tax net and, therefore, the government loses no revenue by removing advance tax,” he added.
The National Housing Development Fund’s mandated contribution will have an impact on Kenyans as well. The fund suggests implementing a three percent employee deduction for the program supporting affordable housing. Employee donations are intended to be matched by employers.
The impact on employees will be significant when combined with the proposed changes to NHIF and the recent adjustments to national pension contributions, particularly at a time when many are already struggling with the high cost of living.
As it prepares to sign the host government agreement and begin the front-end engineering design of what will become the largest energy project in eastern and southern Africa, Tanzania estimates that the cost of developing its liquefied natural gas (LNG) project is $42 billion after the most recent technical analysis.
The offshore project’s initial projected cost was $30 billion, however some current industry sources put the figure at $40 billion.
“There is a lot of analysis ongoing. The recent technical analysis shows that offshore drilling and piping will push the project to $42 billion,” Tanzania’s Permanent Secretary in the Ministry of Energy Felchesmi Jossen Mramb, said.
In Kampala, Tanzania pitched an additional 26 exploration areas, both onshore and offshore, that will be up for grabs by year’s end in the nation’s first licensing round since 2013, in order to find more hydrocarbons. He was speaking on the sidelines of the 10th East African Petroleum Conference and Exhibition.
Tanzania plans to develop its 57.54 trillion cubic feet of gas that has already been discovered by 2028, with participation from the Tanzania Petroleum Development Corporation (TPDC) and international oil companies Shell Plc and Equinor ASA as the lead partners. This will make Tanzania the region’s LNG giant.
Energy Minister January Makamba stated in March that the project’s negotiations had come to an end and that contracts were now being drafted, including a Host Government Agreement (HGA) and one regarding the linking of Blocks 1, 2, and 4. Blocks 1 and 4 are operated by Shell, and Block 2 by the Norwegian company Equinor.
After the HGA is signed, the project will begin the pre-front end engineering design (FEED) feasibility studies, which will take two years, according to Shigela Malosha, director of contracting and licensing at the Petroleum Upstream Regulatory Authority. This will result in the FEED, which will take a further three years.
Mr. Malosha warns that the project’s final investment decision is anticipated in 2028 rather than 2025 as had been anticipated, with construction anticipated to take three and a half to five years, depending on the technology utilized.
“Uganda and Kenya have each signed a memorandum of understanding with Tanzania to buy its LNG, with the requisite infrastructure to transport the product in the early planning phase,” Mr Mramba told the EAPCE delegates.
Davis Chirchir, the cabinet secretary for energy in Kenya, says that the regional energy plan should include locked-in agreements that let nations benefit from their neighbors’ clean energy initiatives, such as Tanzania’s natural gas, Uganda’s hydropower, and Kenya’s geothermal resources.
810 km of a natural gas network are scheduled for development in Tanzania. 2,000 houses in the nation are already connected to natural gas infrastructure, and Songo Songo and Mnazi Bay power facilities use onshore natural gas to generate 62% of the nation’s installed 1100 MW of energy.
Only 650 million standard cubic feet per day of its 57.54 trillion cubic feet of natural gas reserves are generated daily.
