Car owners in Kenya will soon be hit hard with the National Treasury proposing a new radical tax for buyers.
The National Treasury is proposing to introduce a Motor Vehicle Circulation Tax which will target Kenyans buying cars at the point of acquiring an insurance cover.
The Njuguna Ndung'u-led ministry wants Kenyans to start paying the tax once the buyer gains full ownership of the vehicle.
“There will be a minimum tax amount payable by all motor vehicle owners in addition to a graduated amount based on the engine capacity of the vehicle,” the document reads in part.
Acquiring insurance is clear confirmation of ownership of motor vehicles in the country.
In its Medium Term Strategy for the Financial Years 2024-25 and 2026-27, the National Treasury said the levy, which will be classified as a wealth tax,will be paid annually.
The motor vehicle circulation tax will be levied concurrently with the carbon tax which will be introduced to discourage the use of fossil fuels.
The government sees the tax as a solution that will address the twin challenges of addressing revenue challenges and stopping air pollution.
“Government will explore the possibility of introducing a carbon tax based on the carbon content of fossil fuels,” the draft document reads in part.
The government will introduce excise taxes gradually and will be phased over the life of imported vehicles.
The Kenya Kwanza government is looking at introducing an excise tax on tractors, forklifts, excavators and earth movers but also introducing tax incentives that promote the use of green energy.
At the same time, the government will be reviewing the current taxes on electric vehicles that are environmentally friendly to support the transition into a green economy.
