The Finance Act, 2021 assented into law by President Uhuru Kenyatta on June 29, 2021 took effect on July 1. It introduced a raft of changes in the country’ tax regime, which include the Value Added Tax Act, the Excise Duty Act and the Income Tax Act.
The core aim of these changes is to increase the tax base by on-boarding potential tax transactions and thereby growing the national tax revenues. It is a fact that the government is in a dire financial situation and is facing difficulty in meeting its debt and expenditure obligations. This informs the increase in the levies and duties payable to the taxman.
The implementation of the act has seen an introduction of a 16 per cent VAT on liquefied petroleum gas causing the cost of cooking of gas to rise to an all-time high. The implication of this policy will be a reduction in the use of LPG as a source of cooking fuel for households. They will seek cheaper alternatives that are the use of firewood and charcoal. This will be detrimental to environmental conservation and will slow down the gains we are making as a country.
Data from the Kenya National Bureau of Statistics point to a fast-growing industry as Kenyans turn to cheaper sources of energy. The consumption of cooking gas has grown from 93,000 metric tonnes in 2012 to 320,000 metric tonnes in 2020. The report further indicates that whereas we had 9 LPG filling plants in 2012, we currently have 105 plants spread across the country.
The expansion has been experienced largely in the last five years since the National Treasury scrapped the tax on LPG to encourage households to shift to cleaner and cheaper sources of energy. Firewood and charcoal are the leading sources of cooking fuel in Kenya and they are equally the leading drivers of deforestation.
The Ministry of Energy estimates that more than 90 per cent of rural households use firewood, while over 80 per cent of urban households use charcoal. There have been concerted efforts from environmentalists, educators, and the government through its agencies to undertake various interventions, including tree planting and adoption of alternative sources of fuel to enhance conservation among the population.
The consequences of increasing the cost of gas, which is one of the widely used alternative sources of cooking energy, will significantly push the population back to traditional sources of energy. The shift comes with a socioeconomic cost, which includes poor health issues due to air pollution by the conventional sources of energy.
Parliament, which approved this extemporaneous policy, needs to go back and decisively reconsider its position to safeguard the environmental gains. It should go a step further to enact provisions that will facilitate tax exemptions on alternative sources of energy. This will positively impact Kenya’s conservation efforts, including the Greening Kenya campaign that aims at increasing the forest cover by 10 per cent. Kenya, being a member of the UN Framework Convention on Climate Change should live up to its spirit of being an international model among the developing countries that are leading in the fight against climate change.
Jeffrey K. Kosgei : One Child One Tree Initiative