National Assembly Finance Chair Kimani Kuria explained the rationale behind introducing the motor vehicle circulation tax in the Finance Bill, 2024.
Speaking during an interview on NTV on Tuesday, May 15, the MP who tabled the Finance Bill 2024, explained that the move was aimed at encouraging investments in the public transport system.
Kuria revealed that many investors were shying away from investing in public transport, especially in the city, because of many Kenyans drive their own private vehicles.
Therefore, with the introduction of the tax, there is a likelihood that the number of private vehicles on the road will reduce and spur the development of the public transport network.
"The tax is a hybrid between an income tax and wealth tax. It also tries to bring in a user-pay tax like a levy. It is like saying that if you do not want to pay the tax, then do not use a car. Just in the same way, if you do not want to use the expressway you do not pay for it.
"Essentially, the long-run impact of this will be to encourage investment in elaborate public transport," he stated.
Kuria added that most developed countries in the world had efficient public transport systems hence the need for the country to adopt such programmes.
"If you go to the economies that are slightly ahead of us there are very elaborate and efficient public transport. Every time we have had investors wanting to invest in public transport through PPP, the feasibility studies have shown that we like to drive our cars so much that we are not able to attract serious foreign investment.
"Why would we not have rail transport in Nairobi? If I am driving from Westlands to Kikuyu, why do I feel that I need to drive my car?" he posed.
The Motor Vehicle Tax at a Glance
- The Finance Bill 2024 proposed the introduction of the Motor Vehicle Tax.
- The tax will be imposed on all motor vehicles.
- The proposed tax rate will be based on the value of the car as long as the tax is not below Ksh5,000 and above Ksh100,000.
- The tax will be paid during the acquisition of an insurance policy.
- Insurance companies will act as the collectors of the tax and will remit that to KRA.
- The tax is expected to be remitted within five working days after the insurance is issued.
- Cars exempted from this tax include; ambulances, vehicles owned by the national government & county government, and vehicles belonging to the Kenya Defence Forces, the National Police Service, and the National Intelligence Service.
