The Kenyan National Treasury has abolished the Sh100,000 cap on annual motor vehicle tax in a significant policy shift aimed at expanding the tax base.
The announcement was made by Treasury Cabinet Secretary Prof Njuguna Ndung’u during the budget presentation for the 2024/25 financial year, marking a decisive step towards broadening the government’s revenue collection efforts. This move will substantially increase tax bills for owners of high-end vehicles. Under the new tax regime, the annual motor vehicle tax will be calculated as 2.5 per cent of a vehicle’s value, with a minimum payment of Sh5,000 per year. This change effectively eliminates the previous cap, which had limited the proposed tax to a maximum of Sh100,000 annually.
Consequently, owners of luxury vehicles costing upwards of Sh15 million will now face an annual tax bill of Sh420,000, a substantial increase from the previous cap. The impact of this policy shift extends beyond individual car owners. Public transport operators, including bus, matatu, and lorry owners, will no longer benefit from the previous cap, potentially leading to higher fares for passengers. However, the Treasury has proceeded with the proposal despite objections from these stakeholders. Certain categories of vehicles will remain exempt from the annual tax, including ambulances, vehicles owned by the National Intelligence Service, the military, police, and national and county governments. Additionally, vehicles owned by individuals with tax privileges under the Privileges and Immunity Act will not be subject to the new tax.
The Treasury’s decision to remove the cap on motor vehicle tax aligns with its broader objective of achieving Sh2.91 billion in ordinary collections for the 2024/25 financial year. Specifically, the motor vehicle tax is expected to contribute Sh58 billion to this target. However, economists and budget analysts have expressed concerns that the tax may dampen vehicle sales, particularly in the high-end segment. The anticipated rise in insurance costs for these units could further exacerbate the potential impact on consumer behaviour. Nevertheless, the government appears resolute in its pursuit of fiscal consolidation and self-reliance.
Official data reveals that the number of registered motor vehicles reached 2.19 million in 2022, up from 1.27 million eleven years ago. This reflects the expanding automotive market and the corresponding need for sustainable revenue generation.
Amazing! It appears this…
Amazing! It appears this government is out to tax anything and everything in Kenya. Is this not double taxation? First you buy the car and pay tax and every year you pay tax on the same vehicle! So what this means is what the deputy president said: Kenya has shareholders. These luxury cars will be driven by three classes of people:
1) the senators, mpigs, governors and anybody in the government. Why? Because they don’t pay for the cars and maintenance, the tax payers pay for their luxuries.
2) The people that run corruption. These are the guys that don’t have particular jobs but they do DEAL.
3)The traffic police and anyone who is supposed to protect and has CROWN.
So what will happen? The government will lose more money in revenue coz less people will stop buying these luxury cars resulting in less tax and less employment in cars.
Next to be taxes will be luxury clothes, designer stuff etc.
Next to be taxed will be individuals over age 20. They used to call this something like “head tax” during the colonial days. So ladies and gentlemen , welcome to Animal Farm!
@ Lucy wa Maina, I concur…
@ Lucy wa Maina, I concur with you 100%. I am also wondering if the think tank taxed with formulating this bill ever took time to review its repercussions;or seriously paid attention to the objections raised by the opposition party;which is the people’s watch dog.
Iam now afraid that this taxation might even extend to our farm animals,and birds….
The problem with this government is that it’s afraid of taking drastic measures to combat this high GDP dept ratio. It appears that they only know how to increase revenue by taxing. How about reducing the bloated expenditure,and creating other avenues of Increasing Income?Unfortunately the vast part of Income pie comes from Individuals…So Individuals will bare the burden,and Lucy you have succinctly highlighted that not all individuals with bare the same burden.Movers and shakers will evade the tax or pass it defer it…
Actually I am surprised that they have not talked,at least not openly of printing more money.This could be a directive from the IMF,and the World bank.My two taxfee cents.
To further explain this…
To further explain this simpler; if you went to city’s food shades for ugali and nyama, you would possibly part with something less than ks500. But if you went to Safari Park and the likes, and with the exact same food, you would part with some Ks 5000 if not more. And you see no one forces anyone to go spend 5k instead of 500! Not a complaint that they are paying more. That to me is luxury. As long as the tax is not more than the luxurious car, they can afford all day.
One of Zakayo’s aka Ruto’s…
One of Zakayo’s aka Ruto’s task as a western puppet is push hard on a pilot study project to test the implementation of stringent & stressful social parameter controls and their impact on a nation on the issues of climate change ( Africa Climate Summit & Africa Climate Week 2023 funded by the wests Paris Agreement) and population control. The worst is yet to come.
Bottoms up, where the bottom…
Bottoms up, where the bottom pays for the top. I’m wondering if they’ll artificially inflate car values to get to the desired figure. After all how many vehicles are worth $110000 after a few years on Kenyan roads or American roads for that matter?