After months of deliberation, the Kenya Revenue Authority is still deciding how to handle the Sh5.1 billion in taxes that oil marketing firms paid for a shipment carried on the MV Paloma, which was later rejected and barred from Kenya’s market. Under an emergency tender, One Petroleum brought the fuel ashore and stored it at Kenya Pipeline Company facilities from March 28 to 30.
The Energy and Petroleum Ministry subsequently ordered the cargo’s removal, citing non-compliance with domestic standards and procurement outside the Government-to-Government system. Although the 37 marketers slated to receive and sell the product were instructed to neither collect nor pay for it, the OMCs had already transferred the Sh5.1 billion after estimating the tax KRA would levy once the fuel entered local distribution.
After the shipment was removed and the related customs paperwork voided, the Kenya Revenue Authority informed the Senate Committee on Energy that it is channeling the funds into later imports instead of issuing refunds. By June 9, an amount of Sh2.8 billion, more than fifty percent of the original sum, had been credited to fresh customs entries for vessels that arrived after the MV Paloma was withdrawn, while the remaining balance is being processed through the usual customs system.
The incident originated from a supply-concern: in March, the Vessel Alignment Committee reported that reserves of super-petrol were dwindling after the MV Elka Apollon could not pass through the Strait of Hormuz because of the Iran conflict, pushing back the next cargo schedule. To address the anticipated deficit, the ministry launched an emergency tender, selecting One Petroleum and Oryx Energies to each bring in 60,000 tonnes of super-petrol.
The Kenya Revenue Authority’s decision to shift the tax revenue represents a practical interim measure rather than a final accounting solution. Because the tax relates to a self-declared transaction that never materialised, the amount is not legitimately due; applying it as a credit to unrelated future importers instead of reimbursing the specific OMCs mixes distinct tax obligations into a collective industry pool, a practice that may merit regulatory review.
This approach also prompts equity concerns: OMCs that had no role in the rejected shipment ended up supporting the Treasury’s cash flow for a failed deal. Underlying the episode is an issue of procurement oversight: the emergency tender that sidestepped the G-to-G framework resulted in fuel that did not meet Kenyan specifications, highlighting a tension between rapid crisis sourcing and quality control that future supply emergencies could again expose.
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