KRA Explains Why Marketers Deserve Sh5B Refund in Fuel Cargo Dispute

The Kenya Revenue Authority (KRA) has defended its plan to clear a Sh5 billion tax refund to oil marketers, telling legislators that a disputed petroleum cargo was never consumed locally.

Appearing before the Senate Energy Committee, tax officials faced questioning over the movement of 66 million litres of petrol imported aboard the vessel MT Paloma by One Petroleum.

The authority stated that the product was reclassified as transit cargo, and redirected to regional markets outside Kenya following a directive from the Ministry of Energy.

Bernard Kibiti, the Manager of Petroleum Monitoring at the Kenya Revenue Authority (KRA), explained that oil marketers had already paid the taxes upon the arrival of the shipment.

The companies, however, did not take physical delivery through the Kenya Pipeline Company (KPC) distribution network before the government ordered its diversion.

According to Kibiti, the redirection meant the initial product had to return to the original exporter.

The importer was then tasked with seeking alternative markets outside the country.

The taxman insisted that holding the Sh5 billion would be unjust, as the marketers paid for a product they could not access.

Senators remained skeptical about whether any portion of the cargo slipped into the local retail network before the change of destination.

Kakamega Senator Boni Khalwale challenged the rationale, questioning why public funds should reimburse companies if no financial loss occurred.

In response, KRA maintained that customs documentation proves the fuel never entered the domestic grid.

Dr. Lilian Nyawanda, the Commissioner of Customs and Border Control, informed the committee that the ministry's intervention necessitated a complete reallocation of the cargo.

The adjustment required oil marketing companies to file fresh declarations for subsequent incoming vessels, matching their allocated portions to new entries.

The credit from the initial payment would then transfer to these subsequent shipments.

Aside from the MT Paloma logistical dispute, the tax authority disclosed broader constraints affecting the national exchequer.

A previous state policy reducing Value Added Tax (VAT) on fuel from 16 percent to 8 percent has compromised collections.

The intervention has cost the government approximately Sh9.1 billion in foregone revenue.

The parliamentary inquiry continues to examine whether all supply chain protocols were observed during the diversion.

The revenue agency concluded its testimony by emphasizing that its statutory mandate remains confined to customs clearance and tax collection.