EAC faces fuel crisis as Kenya seizes over 200 trucks

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By The EastAfrican

Uganda, Rwanda and parts of the Democratic Republic of Congo are staring at a possible fuel shortage after Kenyan tax authorities impounded hundreds of trucks that ferry fuel to the landlocked neighbouring countries.

The Kenya Revenue Authority (KRA) impounded the trucks in the past one week, demanding tax arrears dating back to 2015.

More than 200 trucks loaded with export fuel destined for Uganda, Rwanda, Burundi, South Sudan and parts of the DR Congo are grounded at the Eldoret and Kisumu fuel depots after KRA issued letters to transportation companies demanding taxes amounting to $7.2 million (Ksh757.6 million).

Victoria University

The tax demand emanates from KRA’s assertions that the oil marketing and transporting firms have been loading products destined for the export markets but which ended up being sold in the local market, an accusation the transporters have denied.

The Kenyan taxman has refused to clear the affected trucks from leaving Kenya Pipeline Company depots, igniting concerns of supply disruptions across the region.

Who benefits?

The detainment also raises fears that Kenya could further lose its fuel export market as neighbouring countries look for alternatives routes, with Tanzania being the likely main beneficiary.

Kenya published new, reduced local and export tariffs for pipeline fuel transportation that came into effect on February 15, 2020, in a bid to help Kenya recover its export market.

“The transport companies together with oil marketing companies have provided proof to KRA that these trucks exited through Malaba and Busia and the documents provided include KRA exit notes and KRA rotation numbers all issued at the borders but KRA wants to hear none of it,” said a manager at a firm whose 30 trucks have been impounded.

He added that the transporters have also supplied the taxman with documents from respective authorities proving the trucks entered the countries.

“KRA has come up with new demands that we go to the countries where the product was destined and bring evidence that duties were paid there, a mandate that neither falls on KRA or Kenyan business entities,” he added.

Penalty/interest

The EastAfrican has obtained a copy of a letter addressed to one of the companies in which KRA is demanding more than $11,000 (about Ksh1.1 million) for “taxes on unaccounted for cargo” and the list of trucks impounded.

“You are therefore required to account for the fuel in full or pay the principal taxes and penalty/interest thereon within 14 days from the date of this letter/demand failure to which enforcement measures shall be taken to recover the same without further reference to you,” states the KRA letter.

The letter, dated February 28, 2020, was signed by P. Ng’ang’a on behalf of the Commissioner of Customs and Border Control.

The EastAfrican has also established that KRA has sent letter to banks demanding they facilitate payment of the taxes from the accounts of the affected transporters by liquidating their security bonds.

Oil marketing companies that export petroleum products are required to obtain a bank cash bond that acts as a guarantor that the products will exit Kenya.

Marketers maintain three-year bonds with banks, with the bond management system interlinked with KRA. This means that oil marketers should always have cash in the bank to make a transit entry.

When contacted, KRA commissioner for Customs and Border Control Kevin Safari said that some oil marketing companies had outstanding transit transactions that the taxman has been seeking to account for.

Simba system monitoring

He added that although KRA has started to allow trucks to leave the depots and transport products to neighbouring countries, the authority is determined to recover all the outstanding taxes.

“Where taxes remain outstanding we will recover from the guarantors to the transit security bonds, that is insurance companies and banks,” he said.

For exports, taxes are paid when the products are still in Kenya with KRA’s Simba system monitoring movement of the products that can only exit Kenya when issued with a certificate of export and a rotation number indicating a KRA officer physically witnessed the truck cross the border.

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