GRAPHICS DEPICTING VAT
Kenyan car owners are set to face a significant financial burden, as the National Treasury has proposed a novel tax for vehicle buyers. The National Treasury is suggesting the implementation of a Motor Vehicle Circulation Tax, which will specifically target Kenyan individuals when they purchase car insurance.
The Ministry under the leadership of Njuguna Ndung’u aims to require Kenyan citizens to commence tax payments as soon as they assume full ownership of their vehicles. According to the document, there will be a minimum tax amount applicable to all vehicle owners, along with a variable tax based on the engine capacity of the vehicle.
Acquiring insurance will serve as a clear indicator of vehicle ownership within the country. In its Medium Term Strategy for the Financial Years 2024-25 and 2026-27, the National Treasury has classified this levy as a wealth tax, which will be paid on an annual basis. This motor vehicle circulation tax will be introduced in conjunction with a carbon tax, which aims to discourage the use of fossil fuels. The government views this tax as a solution to tackle two pressing issues: generating additional revenue and mitigating air pollution.
The government is considering the possibility of introducing a carbon tax based on the carbon content of fossil fuels, as stated in the draft document. Excise taxes will be incrementally introduced and phased in over the lifespan of imported vehicles.
The Kenyan government, under the Kenya Kwanza initiative, is also contemplating the introduction of excise taxes on machinery such as tractors, forklifts, excavators, and earth movers. Additionally, they plan to implement tax incentives to encourage the adoption of green energy.
Furthermore, the government intends to review the existing taxes on electric vehicles, which are environmentally friendly, in order to support the transition towards a more sustainable and eco-friendly economy.