Second-hand car importers file appeal over taxes

Importers of second-hand cars now want the tax appeals tribunal to intervene and resolve a tax crisis they have with the Kenya Revenue Authority.

Through their lobby group, Car Importers Association of Kenya, car importers yesterday said they will file an appeal at the tribunal on Monday, seeking its intervention over duty charged on commercial vehicles.

This is after a seven-day notice issued to the taxman to withdraw the template used to calculate the duty lapsed this week.

“We communicated to KRA and they have not responded. This means they have accepted we move to the tribunal,” CIAK chairman Peter Otieno said.

The importers said the KRA is using the wrong depreciation formula on commercial vehicle, different from the one used on private cars, despite both categories attracting excise tax under the new tax regime.

Treasury Cabinet Secretary Henry Rotich amended the Excise Duty Act 2015, introducing an ad valorem 20 per cent tax based on the value of the vehicle.

In effect it repealed the specific duty rate he introduced in 2015-16 financial year of taxes between 150,000 and Sh200,000 based on year of first registration.

The association has accused the taxman of omitting the 20 per cent excise tax when calculating the vehicle depreciation value to get the book value of the unit, but includes it in the final taxation, which increases duty.

For instance, the formula used to depreciate a private vehicle is Current Retail Selling Price, which is divided by 125 per cent (duty), divided by 120 per cent (excise duty), divided by 116 (VAT), which is then divided by 125 per cent (profit margin). This is then multiplied by the book value.

“KRA are using a formula that is subjecting commercial vehicles to higher taxes adding up to Sh200,000 more. The tax should be uniform,” Otieno said.

He said high taxes and value have slowed down imports of commercial vehicles, which account for 10 per cent of the monthly 9,000 motor vehicle imports.

“For example, KRA increased the value for Toyota Hiace to Sh7.3 million from Sh2.3 million without any basis. Instead of facilitating business, they are killing businesses. We are ready to pay taxes but it must be done fairly,” Otieno said.

“Actually, KRA is losing a lot of revenue because they are overtaxing people who end up withdrawing from businesses,” he said.

The KRA missed its quarter one target (July-September) by Sh14.4 billion, collecting Sh313.6 billion against a target of Sh328.0 billion.