Car owners and aspiring car owners seem to be an unlucky lot because if its not an issue of increases in the fuel cost, it is increases in taxes. In 2015, Treasury announced a change in the excise duty on cars. They placed an excise tax on locally assembled cars and introduced a flat fee on used imported cars rather than charge 20 per cent of the value of the car. This move had an effect on dampening the demand for cars with market for locally assembled and used cars shrinking by 22.4 per cent in the 9 months to September 2016. Due to the low volumes and hence low tax revenue, Treasury finally saw the light and removed the excise tax on the locally assembled vehicles and reverted to charging 20 per cent of the value of a used car instead of the flat fee.
The Kenya Revenue Authority, has now announced changes in the formula of calculating the tax to be charged on an imported vehicle. According to the Car Importers Association of Kenya, the new tax regime will see taxes increase to 43 per cent from the current 20 per cent.
The new tax regime which took effect as from 5th February will see a Toyota Land Cruiser V8 5663cc sell at Ksh. 21.6 million and attracting a duty of Ksh. 2.3 million. In 2017 the same was selling at Ksh 17.9 million and attracting a Ksh 1.9 million. Toyota Alphard 2360 cc eight-seater which was retailing at Ksh. 3,088,590 in 2017 will now sell at Ksh. 5,441,850, attracting additional duty of Sh203,958. Whereas a Lexus RX450 3500cc that was valued at Sh6,982,000 last year is now priced at Sh11,525,368 attracting additional duty of Sh485,670
Just like in 2015, this rise in the taxes of used cars will most probably see a slow down in demand for the units and consequently a reduction in the taxes collected.