National Assembly Finance Chair Kimani Kuria explained how the government will implement the proposed motor vehicle tax as proposed in Finance Bill 2024.
For starters, during an interview on Citizen TV, the MP who tabled the bill revealed that the government was aiming to collect Ksh58 billion in the first year of imposing the wealth tax.
He explained that the new proposal was aimed at raising revenue to fund the budget while at the same time encouraging investments in the public transport system. Below is an explanation of how the government will enforce the new tax targeting car owners.
How it Will be Collected
As proposed, motorists will be required to pay a motor vehicle tax at the rate of 2.5 per cent of the car's value. The money will be paid during the acquisition of insurance covers.
However, the minimum tax payable for the new tax is set at Ksh5,000. The maximum tax payable is set at Ksh100,000.
Other parameters that will determine the tax payable include the make, model, engine capacity and year of the vehicle's manufacture.
"An insurer of a motor vehicle shall collect and remit motor vehicle tax within five working days after issuing a motor vehicle insurance cover.
"An insurer who fails to collect and remit motor vehicle tax shall be liable to pay a penalty equivalent to fifty per cent of the uncollected tax and the actual amount of the uncollected tax," the government proposed in the Finance Bill.
Reason for Introducing Tax
Kimani explained that the tax would spur investments in the public transport system. He detailed that foreign investments were not being achieved in the sector owing to the high number of private vehicles.
He cited the example of the Bus Rapid Transport (BRT) system that had failed kickoff despite years of planning.
On the other hand, Kuria cautioned Kenyans not to focus so much on the new proposal and underplay other tax measures that were being proposed.
Kimani explained that Kenyans were likely to lose meaningful debate on the whole Finance Bill if they only focused on the motor vehicle tax as was with the housing levy.
"The last Finance Bill became a conversation about the housing levy and VAT on fuel and we missed out on 82 other clauses that were on that bill. Unfortunately, I see the same happening this year," he stated.
