Increased taxation and tight credit markets hurt vehicle imports last year, dealers say.
The 2017 Economic Survey by the Kenya National Bureau of Statistics shows motor vehicle imports fell 22.52 per cent in 2016 to 85,063 from 109,781 units the year before.
The drop in motor vehicle imports has been linked to taxation regime introduced by Treasury CS Henry Rotich in the financial year 2016-17 which ends on June 30.
Rotich introduced an ad valorem rate of 20 per cent based on the value of the vehicle. This was enforced following revision of the Sh150,000 excise duty for vehicles less than three years old and Sh200,000 for those older than three years, a year after being implemented in 2015-16 financial year.
The tax regime has largely affected importation of commercial vehicles, Car Importers Association of Kenya chairman Peter Otieno told the Star.
“Under the law, all vehicles should attract the same tax. However, KRA (Kenya Revenue Authority) is using a formula that is subjecting commercial vehicles to a higher tax, which add up to Sh200,000 more (than other vehicle types),” Otieno said.
The lobby has accused the taxman of ignoring the 20 per cent excise tax when calculating vehicle depreciation value to get book value, but including the duty in the final taxation. This, the association has charged, increases the duty.
According to the Kenya Motor Industry Association, new motor vehicle sales also reduced last year, falling 30.67 per cent to 13,535 from 19,523 units in 2015.
The slowdown has been largely attributed to tight credit markets, with most lenders reluctant to finance car buys following last September’s enforcement of the Banking (Amendment) Act that capped interest on loans at 14 per cent.
The survey by the KNBS indicates that expenditure on importation of industrial machinery in 2016 rose by 19.7 per cent to Sh253.5 billion, accounting for 17.7 per cent of the country’s total import bill in 2016.
The value of unmilled wheat imports dropped to 1.36 million tonnes from 1.4 million tonnes in 2015, while those of wheat flour dropped from 16,306 tonnes to 15,925 tonnes.
Maize imports, on the other hand, dropped from 480,124 in 2015 to 148,558 tonnes. Rice imports, however, rose by 14.8 per cent to 505,999 tonnes up from 442,736 tonnes.
Other commodities that posted notable increases in volumes included chemical fertiliser ( 18.1 per cent) sugar, molasses and honey ( 31.6 per cent), liquefied propane and butane ( 29.1 per cent), and second-hand clothes ( 19.2 per cent), the survey by the KNBS shows.