Owners of high-end cars will pay at least Sh400,000 for the annual motor vehicle tax after the National Treasury did away with the Sh100,000 cap.
While presenting the budget for the 2024/25 financial year, Treasury Cabinet Secretary Njuguna Ndung’u did not mention the earlier proposal of an upper limit, setting up car owners whose units cost more than Sh4 million for higher tax.
Treasury had earlier proposed the new tax at a rate of 2.5 per cent subject to a minimum of Sh5,000 and a maximum of Sh100,000 per annum.
Most Kenyans who rely on public transport are bracing themselves for tougher times upon implementation of the new tax, given that bus and matatu operators will transfer the burden to passengers.
This means owners of high-end units that cost upwards of Sh15 million will pay Sh420,000 every year, with bus and matatu owners equally hit by the removal of the cap.
“To expand the tax base and make our country self-reliant, I propose to introduce an annual motor vehicle tax at the rate of 2.5 per cent of the value of the vehicle, subject to a minimum amount of Sh5,000 per annum,” Prof Ndung’u said.
A 33-seater bus that goes for about Sh6.6 million will attract Sh165,000 while owners of 51-seater units that cost around Sh8.5 million will pay Sh212,500.
Owners of second-hand cars will only pay lower tax if value falls. The tax will be paid on a car when getting the insurance cover.
Vehicles to be exempted from the tax are ambulances, those owned by the National Intelligence Service, the military, police and national and county governments.
Vehicles owned by people exempt from tax under the Privileges and Immunity Act will not be subjected to the annual tax.
The removal of the cap comes despite operators of public vehicles opposing the tax. Treasury had initially proposed a minimum of Sh5,000 and a maximum of Sh100,000.
Bus, matatu and lorry operators had opposed the tax, arguing that it would lead to higher fares.
According to Prof Ndung’u, Treasury targets to raise Sh58 billion through the motor vehicle tax, as part of the measures to collect Sh2.91 billion in ordinary collections for the financial year.
Economists and budget analysts say the tax may dampen the sale for vehicles, given the anticipated rise in insurance cover for the units.
Official data shows that the number of registered motor vehicles hit 2.19 million in 2022, up from 1.27 million eleven years ago.
