Car owners face more pain as Treasury mulls new revenue streams

Car owners in the country will soon need to dig deeper in their pockets as the government mulls introducing new taxes in its sustained quest to open new revenue streams to meet new targets. The new radical tax dubbed Motor Vehicle Circulation Tax will target Kenyans buying cars at the point of acquiring an insurance cover.

Should the State implement the taxation strategy, purchasing and owning vehicles will become more expensive given plans to introduce other taxes on all vehicles in the country.

Higher taxes

According to Treasury and the Transport ministry, the wealth tax that will be imposed on all vehicle owners will be implemented at a flat rate in addition to another rate that will be charged based on the engine capacity of a vehicle. Cars with higher engine capacity will be required to pay higher taxes than those whose vehicles have lower engine capacities in the government’s Medium-Term Revenue Strategy (MTRS) that proposes to have the tax imposed annually.

“The government will assess the viability of introducing Motor Vehicle Circulation Tax in the medium term as a form of a wealth tax. The tax will be paid annually by motor vehicle owners at the point of acquiring an insurance cover. There will be a minimum tax amount payable by all motor vehicle owners in addition to a graduated amount based on the engine capacity of the vehicle,” the strategy document reads in sections.

The tax is proposed to be implemented between the 2024/2025 and the 2026/2027 financial year. On the other hand, as the government prioritises plans to mitigate climate change, it is also aiming to align its plans with taxation policies.

Under this proposed tax plan, the government will increase Excise Duty for vehicles that run on fossil fuels - Diesel and Super Petrol while electric vehicles will be exempted from this tax plan, a plan the government seeks to implement between the 2024/2025 and the 2026/2027 financial year.

“The following will be evaluated within the scope of carbon tax including a gradual increase of excise taxes on vehicles that use fossil fuels to address environmental damage and negative health effects. The increase will be phased over the strategy on imported vehicles. Also, the government will evaluate the introduction of excise on other equipment that uses fossil fuel tractors, such as tractor forklifts, excavators’ earthmovers,” the strategy further read.