Effect Of Fuel Taxation On Fuel Price In Kenya

Abstract

The study is done to assess the effect of fuel taxes on fuel pricing in Kenya. In Kenya, taxes as a share of fuel prices are highest for petrol and lowest for kerosene. In Kenya petroleum accounts for 22 per cent of the total primary energy supply, 67 per cent of which is consumed in transport sector. Tax rates are mainly set through state legislation while expenses are driven by market forces such as infrastructure costs, inflation and demographic shifts. These rates are revised from time to time. Measures to incorporate marketing strategies such as market promotion, advertisement,price-cut, design and improvement of customers comport are necessary. The right price strategy is important for maximizing the revenue. The most common taxes charged on fuel in Kenya include road maintenance levy, Excise tax and railway development levy. The revenue collected from the fuel taxes is mostly used to construct and repair roads; however, most of the monies collected form tax are not for the purposes it was levied for. If the taxes charged on fuel are absorbed by customers in form of increased price, their earnings decline by the amount of tax.