Govt urged to exempt more cars from circulation tax

Thursday, May 30th, 2024 14:44 | By
The proposed finance bill seeks to charge vehicle owners 2.5 percent of the value of their cars. PHOTO/Pexels
The proposed finance bill seeks to charge vehicle owners 2.5 percent of the value of their cars. PHOTO/Pexels.

The government has been urged to expand the bracket within which particular motor vehicles will be exempted from paying the vehicle circulation tax in the proposed finance bill.

In their submissions on Thursday, May 30, 2024, RSM Kenya, a tax consultancy firm in Kenya urged the government to include several other vehicles previously excluded from the tax-exempt cars.

The chair of the finance and national planning committee and Molo Member of Parliament (MP) Kuria Kimani is leading the public participation forum on the proposed finance bill set to take effect on July 1, 2024.

"Fire brigade vehicles, emergency rescue vehicles and persons involved in the sale of motor vehicles should be exempted from this tax," the firm submitted.

Jilna Shah, a tax director, submits her thoughts on the proposed finance bill 2024. PHOTO/@NACommitteeKE/X

Currently, all the government and county motor vehicles are exempted from the tax. The other vehicles are ambulances, National Intelligence Service (NIS), Police service and vehicles that belong to individuals who are exempted from tax as envisioned under the Privileges and Immunities Act Cap. 179.

The firm argued that individuals involved in the sale of motor vehicles would significantly increase the cost of cars should the levies be born directly by them.

Car tax requirements

The proposed tax will be collected by insurance companies, meaning that when it’s time to renew the insurance cover, one will also have to include the Motor Vehicle Tax.

The insurance company will then remit the tax within five days of issuing your cover or face a 50% penalty on the uncollected amount. 

The tax proposes that motor vehicle owners pay 2.5 per cent of the value of their cars annually to the state. However, the maximum amount of tax payable on a given motor vehicle shall be capped at Ksh100,000 per year.

The law has generated a heated debate through various sectors in the country with Githunguri MP Gathoni wa Muchomba saying the law would only exacerbate the already worse economic situation in the country.

“By the way, right now insurance uptake in the country is less than three per cent, so if we add these other obstacles it means then that the uptake will be lower,” she remarked on May 27, 2024.

“Don’t be lied to that this tax is targeting the rich who own vehicles because when a matatu owner pays the tax, he will increase bus fare to recoup the extra cost,” the MP added.

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