Treasury CS Njuguna Ndung’u Pushing for Tax Cuts to Lower Electricity Costs

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Treasury Cabinet Secretary Njuguna Ndung’u is advocating for measures to mitigate the increasing electricity expenses in the wake of escalating living costs.

During his appearance before the Energy Committee, chaired by Mwala MP Vincent Musyoka, Ndung’u recommended a comprehensive review of several charges associated with token purchases.

The charges under scrutiny include the Water Resource Management Authority (WARMA) Levy, the Energy Regulatory Commission (ERC) Levy, and the Rural Electrification Program (REP) Levy. These levies are imposed to fund various governmental initiatives, such as rural electrification projects.

However, Ndung’u clarified that the proposed reduction of the 16% Value Added Tax (VAT) on electricity, as suggested by legislators, might not be feasible.

“Members of the Energy Committee expressed concerns about the impact of multiple taxes and levies on the overall electricity costs and explored ways to alleviate the burden on Kenyan citizens.

“In response, Ndung’u informed the Committee that the sole national tax on electricity is the 16% VAT, and abolishing it would create inconsistencies in the VAT tax structure,” he clarified.

The review of these levies could potentially lead to lower electricity expenses for Kenyan consumers and, in the long term, attract foreign investors to the country, particularly in light of Tanzania’s emerging status as a regional investment hub.

At present, from a Ksh200 token purchase, Ksh24 accounts for VAT, Ksh6.23 is allocated to the Rural Electrification Program (REP) Levy, and Ksh0.1 is designated for the Water Resource Management Authority (WARMA) Levy.

Additionally, Ndung’u acknowledged the need to address power outages to enhance Kenya’s appeal to investors.

The MPs are expected to present a report in Parliament in the coming weeks outlining the recommendations to reduce electricity costs, which will then be subject to legislative debate and government adoption.

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