The National Treasury has scrapped the 20 per cent excise tax on locally assembled vehicles. In a move that is seen as relief to the local motor vehicle assembly industry, the exemption of locally assembled vehicles from the levy is expected to be communicated officially through amendment of the relevant tax laws.
The levy was last month raised to 20 per cent of a vehicle’s value. It raised the prices of pick-ups, buses and trucks went up by between between Sh231,000 and Sh1.2 million.
Locally assembled vehicles however still have to pay value added tax (VAT) at the rate of 16 per cent, introduced in 2013.
In the first five months of this year, locally assembled motor vehicles saw a 26 per cent drop in sales to 5,938. A similar margin of drop in sales value amounting to Sh2.5 billion was also recorded in the period. Motor vehicle assemblers reported an average production decline of 30 per cent in the review period, leading to redundancies of 115 employees and capacity utilisation of just 20 per cent.