Car prices set to rise as importers decry new taxes imposed by KRA

Motor vehicle importers in the country are up in arms over the shift by the Kenya Revenue Authority (KRA) to a system that they argue has resulted in inflated duty charges and ultimately increases the cost of motor vehicles to the end buyers, a move that they fear could see the sector adversely affected.

According to the importers, the authority is using the Container Freight Station (CFS) - a secure, off-dock storage facility where imported vehicles are transferred from ships for inspection, customs clearance, and storage before collection - to do “confirmation,” a process that they argue has been abused, leading to increase in taxes paid.

Billy Pepela, a car importer, said: “Hiyo confirmation wakishafanya wakishapandisha hiyo tax its going to affect all the cars with the same model…kama ni Nissan Note zote wanaends na hiyo…”

Peterson Waweru , the Kenya Association of Motor Dealers Chairperson, said: “They are using something called rulings, they are coming up with absurd figures. How will you buy an Alto at one million?”

The motor dealers say through this ruling, KRA officials are increasing the taxes by over 80 per cent and in some cases by nearly double, a situation they say has made business untenable, with the impact expected to be felt mostly by lower and middle-income earners, who rely heavily on imported used vehicles due to their relative affordability.

“They sit in a boardroom somewhere and decide wow hii gari iko na demand lets hike the price. There is no system. They have nothing. We have gone to court to challenge that, but they can't explain it,” Waweru added.

Pepela noted: “Mazda Demio was Ksh.1.35 million because tax was 253, saizi wameongeza 209, so total tax is 462…so what do you expect? It’s going to change the price, Nissan Note E12 tax is up na 222 so the common Nissan Note that’ we have been selling Ksh.1.1 million is now up to Ksh.1.5 million.”

But KRA, in response to Citizen TV questions on the matter, noted that taxes on motor vehicles are payable in accordance with the Common External Tarif (CET), which sets out the relevant tax rates depending on the classification of the vehicle.

The authority added that it has not abandoned the Current Retail Selling Price (CRSP) and that the 2019 CRSP continues to be used as previously directed by the court.

KRA notes that taxes on motor vehicles include: Import duty charged at 35% of customs value (CIF); excise duty at 20% for motor vehicles with engine capacity not exceeding 1500cc; petrol vehicles exceeding 1500cc but less than 3000cc at 25%; diesel vehicles exceeding 1500cc but less than 2500cc at 35%; petrol vehicles exceeding 3000cc and diesel vehicles exceeding 2500cc are charged Value Added Tax 16%.

The authority further argues that all motor vehicle models are subject to the same valuation methodology.

According to motor vehicles importers if these irregularities are not addressed, the dream of owning for many Kenyans will remain just that, a dream.