The Kenya Revenue Authority has spent months dealing with a Sh5.1 billion tax puzzle related to a fuel cargo aboard the MV Paloma. The cargo was imported by One Petroleum under an emergency tender and discharged into Kenya Pipeline Company storage between March 28 and 30.
The Energy and Petroleum Ministry later directed its withdrawal, finding that the fuel fell short of local standards and was sourced outside the Government-to-Government framework. As a result, 37 marketers were told not to lift the fuel or pay for it.
However, the oil marketing companies had already remitted Sh5.1 billion in taxes after self-assessing what the KRA would demand once the fuel was sold locally. With the cargo pulled and customs declarations cancelled, the KRA has been reallocating the money to subsequent cargoes rather than refunding it.
By June 9, Sh2.8 billion had been applied to new customs declarations from vessels imported since the MV Paloma recall, with the balance being administered under standard customs procedure. The episode traces back to a supply scare in March, when the Vessel Alignment Committee found that super petrol stocks were low.
The ministry invited emergency bids, and One Petroleum and Oryx Energies were picked to import 60,000 tonnes of super petrol each. The KRA’s reallocation of the tax payment is a pragmatic workaround, but it raises concerns about fairness and individual tax liability.
In practice, this means that oil marketing companies uninvolved in the rejected cargo have effectively financed the Treasury’s cash flow on a collapsed transaction. The deeper issue is procurement governance, as an emergency tender bypassing the G-to-G framework produced fuel that failed Kenyan standards.
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