Kenya – In a significant move aimed at bolstering revenue streams and promoting sustainability in the motor vehicle industry, the Finance Bill of 2024 is set to introduce a new tax named the Motor Vehicle Tax. This tax will be applicable to all motor vehicles at the time of insurance issuance, with the rate fixed at 5% of the vehicle’s value, to be deducted annually by the insurance companies.
The proposal outlines that the Motor Vehicle Tax will be determined based on specific criteria including the make, model, engine capacity (in cubic centimeters), and year of manufacture of the vehicle. This approach ensures that the tax is proportional to the vehicle’s value and characteristics.
According to the Third Schedule of the Finance Bill, the motor vehicle tax will be collected by insurance companies who are responsible for remitting the tax to the Commissioner within five working days of issuing an insurance cover. Failure by insurers to collect and remit the tax will result in penalties equivalent to 50% of the uncollected tax along with the actual amount of the tax owed.
However, certain categories of vehicles are exempted from this tax. Notably, ambulances and vehicles owned by the national government, county government, Kenya Defence Forces, National Police Service, National Intelligence Service, or those exempted under the Privileges and Immunities Act will not be subject to this tax.
The Finance Bill aims to ensure compliance and accountability within the motor vehicle insurance sector, promoting a fair and transparent system of tax collection. This initiative aligns with broader efforts by the government to enhance revenue generation while fostering responsible vehicle ownership.
The proposal is expected to undergo rigorous debate and scrutiny in parliament before enactment. Proponents argue that the Motor Vehicle Tax will contribute to the country’s fiscal sustainability, providing essential funds for infrastructure development, road safety initiatives, and environmental conservation efforts.
Critics, however, have raised concerns about the potential impact on vehicle owners and insurance premiums. They emphasize the need for clear guidelines and effective implementation to prevent undue financial burdens on motorists.
The introduction of the Motor Vehicle Tax reflects ongoing efforts by the government to modernize fiscal policies and adapt to changing economic dynamics. This initiative underscores a broader commitment to financial prudence and sustainable development in Kenya’s automotive sector.
