The Kenya Revenue Authority (KRA) has revealed that it gave up Ksh9.1 billion in tax revenue between April and May 2026 after the government reduced Value Added Tax (VAT) on fuel from 16 percent to 8 percent.

Appearing before the Senate Standing Committee on Energy, KRA Commissioner for Customs and Border Control, Dr. Lilian Nyawanda, said the VAT reduction formed part of broader government efforts to ease the financial burden created by fluctuations in international petroleum markets.

Nyawanda also addressed concerns surrounding a Premium Motor Spirit (PMS) shipment brought into the region by the vessel MT PALOMA, which is currently under investigation. 

She clarified that the fuel cargo was redirected to other markets and was never released into Kenya.

According to Nyawanda, customs declarations linked to the consignment have already been cancelled. 

She added that Ksh5.1 billion in taxes paid by several Oil Marketing Companies (OMCs) through the principal importer, MT PALOMA, will be reassigned to customs entries for future fuel imports.

Nyawanda further noted that KRA remains instrumental in ensuring a stable supply of petroleum products by facilitating trade and managing customs processes efficiently. 

She explained that the Authority oversees the importation and clearance of fuel products once they have received approval from relevant Partner Government Agencies (PGAs), which are responsible for conducting quality and compliance inspections.

"KRA supports the petroleum supply chain through the expeditious processing of import documentation, timely assessment and collection of duties, VAT, levies and other statutory charges, as well as the prompt release of cargo at petroleum depots in Mombasa and across the country," she said.

Nyawanda reiterated that KRA’s involvement in the petroleum sector is confined to responsibilities outlined under its legal mandate, including customs clearance, tax assessment, levy collection, transit monitoring and trade facilitation.

This comes days after Energy Cabinet Secretary Opiyo Wandayi assured Kenyans that the country has no fuel shortage despite ongoing volatility in global markets.

In a statement on Friday, May 29, the CS said fuel shipments are arriving as scheduled, and distribution across the country is going on without any interruption.

"On supply, Kenya remains secure. Fuel continues to arrive as scheduled, storage levels are stable, and distribution across the country is ongoing without interruption.

"There is no national shortage, and systems at the Port of Mombasa and inland depots continue to operate normally," read the statement in part.

Wandayi noted that the Ministry of Energy has institutionalized spot checks at all levels of storage and supply to ensure full compliance.

Regarding fuel prices, the CS said the country remains affected by global market trends.

However, Wandayi said Kenya’s systems are designed to mitigate the changes in a structured and predictable way.

"The G2G framework is working as intended - anchoring supply, reducing exposure to volatility, and providing a buffer during global uncertainty. This framework provides Kenya with a key advantage: predictability.

"This stability has been one of Kenya’s biggest advantages in managing supply reliability and cushioning consumers from even sharper price shocks," he said.

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Wandayi also said the G-to-G framework has enabled diversification in sourcing fuel with cargoes being loaded from a range of supply points, including Europe, the US Gulf Coast, India, and the Red Sea.

"This diversification strengthens resilience, reduces reliance on any single route, and ensures continuity even when traditional supply channels face disruption," he stated.

Further, Wandayi mentioned that the G-to-G arrangement has enabled Kenya to maintain relatively stable freight and premium costs of between $78 and $ 97 per tonne, compared to some countries where costs reportedly surged to between $250 and $300 per tonne.

Additionally, he said there are signs indicating that the global pressures affecting fuel supply are easing.

"There are early signs that global pressures may begin to ease. Changes in demand patterns and improved supply routing are gradually stabilising international markets. While the situation remains fluid and unpredictable, the direction is encouraging," he further said.