Fuel Relief Extended: Ruto Signs Tax Laws to Ease Pump Prices

What Ruto signed

Ruto signed the Tax Laws (Amendment) Bill, 2026 and the Kenya Revenue Authority (Amendment) Bill, 2026 at Eldoret State Lodge in Uasin Gishu County on Friday, October 16, 2026, after their passage by the National Assembly.

The first law deals with petroleum VAT and selected construction taxes. The second changes KRA’s board composition, guarantees a minimum operational allocation for the authority and introduces an incentive linked to revenue collected above quarterly estimates.

Fuel VAT relief extended

The Tax Laws (Amendment) Act retains VAT on petrol, diesel and paraffin at 8 per cent, rather than the standard 16 per cent, for an initial 90 days. Treasury Cabinet Secretary John Mbadi may extend the relief by a further 90 days through a Gazette notice.

The government says the measure is meant to shield Kenyans from the impact of disruptions in international oil markets linked to the Middle East crisis. Deputy Chief of Staff Josephat Nanok said the reduced VAT had already been factored into the latest fuel-price calculations by the Energy and Petroleum Regulatory Authority (EPRA) and the Ministry of Energy.

The relief took effect from midnight on October 14, 2026, following the expiry of an earlier 180-day relief introduced in April. EPRA incorporated the 8 per cent VAT rate into its October 14 fuel review, which applied from October 15.

Will pump prices fall?

Not necessarily. The lower VAT reduces the tax component of fuel prices, but it does not cancel increases caused by higher landed costs of imported refined products, exchange-rate movements, freight charges and other supply-chain costs.

EPRA’s latest review raised Nairobi’s maximum retail prices to Sh226.96 per litre for super petrol, Sh227.76 for diesel and Sh219.87 for kerosene. The increases were Sh12.93, Sh9.90 and Sh28.49 per litre respectively, despite the VAT relief.

For motorists, therefore, the law is better understood as a measure that prevents a sharper rise in pump prices rather than one that guarantees a reduction. Its impact on transport fares, food prices and general inflation will also be gradual and indirect.

Construction taxes revised

The second major element of the Tax Laws (Amendment) Act targets tiles, sanitary ware and glass products. The government argues that rising prices of these materials have increased construction costs, including for publicly funded affordable housing projects.

For ceramic tiles, the law replaces a weight-based excise-duty calculation with a surface-area basis. The revised rate is Sh400 per square metre, a change intended to align taxation with how tiles are commonly sold and to ease pressure on builders.

Excise duty on ceramic sanitary ware including sinks, wash basins, baths, bidets, water-closet pans, flushing cisterns and urinals, has been reduced from Sh50 to Sh30 per kilogramme.

The law also revises the description of imported flat glass to align with East African Community protocols. The aim is to ensure that qualifying glass products from within the EAC are not subjected to excise duty contrary to the EAC Customs Protocol.

Will building become cheaper?

The changes could reduce some input costs for developers, contractors and households, but they do not automatically mean cheaper houses or lower retail prices. Final prices also reflect manufacturing, importation, distribution, transport, financing and retailer margins.

The clearest potential benefit is in fittings such as tiles and sanitary ware, where the law directly changes excise treatment. However, consumers will only benefit if importers, distributors and retailers pass the tax savings through the supply chain.

For the affordable housing programme, lower material costs could improve project economics, but the scale of any saving is likely to be modest relative to land, infrastructure, labour and financing costs.

What changes at KRA

The Kenya Revenue Authority (Amendment) Act does not introduce a new tax rate. Instead, it focuses on how KRA is governed, financed and incentivised to collect existing taxes.

The law adds the managing director of the Kenya Ports Authority (KPA) to the KRA board. The government says this will improve coordination between tax collection, customs administration and port operations, which are closely linked in import-revenue collection.

It also removes the “ex-officio member” designation for specified government officials, giving them substantive board membership. The change is intended to clarify their role in KRA decision-making.

KRA funding and incentives

The amendment guarantees KRA funding equivalent to at least 2 per cent of projected annual revenue collections, as reflected in the financial estimates. This is designed to give the tax authority more predictable operational financing.

The law also provides an incentive equivalent to 3 per cent of revenue collected above the amount estimated for a given quarter. The government frames this as a way to reward strong collection performance and improve efficiency without raising tax rates.

The risk is that performance incentives must be carefully administered. If targets are poorly designed, they could create pressure for aggressive enforcement or questionable assessments; transparency in how excess collections are verified and how incentives are spent will therefore be critical.