The 2016 National Budget was good music in the ears of motor enthusiasts, car importers, traders and aspiring car owners. This is after the cabinet secretary for the National Treasury Henry Rotich announced that he was amending the 2015 Excise Duty Act by reintroducing the 20% taxation based on the value of the vehicle.
“This has been perceived to be unfair, inequitable and punitive to importers of vehicles commonly imported by low income earners but beneficial to importers of luxurious vehicles,” said Mr Rotich. “In order to address the situation, I propose to amend the 2015 Excise Duty Act, to remove specific rate of duty and introduce ad valorem rate of 20% based on the value of the vehicle.”
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This value will be obtained from the Current Retail Selling Price (CSRP) of a new car in the local market instead of the Sh. 200,000 flat rate that has been in force since December 2015. A used vehicle worth Sh800,000 will, for instance, be charged a levy of Sh160,000 based on the calculation of 20% of its value as opposed to the current Sh200,000.
In December last year, the government rolled out a new taxation regime for used cars that resulted in inflated prices for second hand cars while giving relief to importers of new high end vehicles. The cost of luxury cars was cut by up to Sh1.27 million. Kenyans looking to purchase popular budget car models valued at below Sh1 million were the hardest hit following a near-doubling of excise duty chargeable on small vehicles.
For instance, a KRA schedule released shortly before the the 2015 Excise Duty Act came into force showed that duty on a Toyota Vitz – one of the smallest cars on Kenyan roads – had jumped from Sh180,069 to Sh345,842, a 92 per cent increase.
Duty on the popular models, Toyota Belta (1290cc), Toyota Premio (1490cc) and Honda Fit (1290cc) went up by Sh98,001, Sh124,000 and Sh145,291 respectively.
Top-of-the-range models such as the Range Rover V8 (5000cc), Toyota Landcruiser V8(4,600cc) and Mercedes Benz V6 (3500cc) have, however, won huge price cuts of Sh523,999, Sh344,000 and Sh1.27 million respectively.
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However, motorists will have to wait for parliament’s approval before they can start to enjoy the reversed car import excise duty.
Nonetheless, motorists will see their fuel costs rise by around Sh. 6. A litre of super petrol and diesel will now attract an additional Sh. 6 after the rise in the road maintenance levy, the biggest jump ever.