The Kenya Transporters Association (KTA) on Thursday, May 23, threatened that its members would be forced to withdraw part of its fleet if the government went ahead to implement the proposed 2.5 per cent circulation tax on vehicle value.
KTA is the largest transporters association in the country boasting of over 15,000 trucks majorly operating in the East African region.
In a statement, KTA remarked that implementation of the circulation tax would significantly increase operational costs, potentially forcing many transport businesses to close.
The Association noted that already, its members were struggling to break even after being burdened with import duty, excise duty, Value Added Tax, and levies for import declaration and railway development.
“Adding another tax to an already heavily burdened asset is unsustainable as the economic strain could force companies to reduce their fleets or lay off employees, negatively impacting livelihoods and increasing unemployment,” KTA warned.
Imploring striking off of the circulation tax, KTA added truck owners were already being required to pay a 30 per cent corporate tax on profits generated from their vehicles.
Apart from withdrawing existing trucks from the Kenyan market, KTA also warned that the tax would discourage investors from investing in the sector.
Considering the tax will target the vehicle's value, KTA warned that Kenyans could use a loophole of choosing less comprehensive insurance to avoid the tax.
This will not only increase the risk of uninsured vehicles on Kenyan roads but also will expose businesses to high risks when repairing damaged vehicles.
There is also worry that some motorists may forego insurance altogether or opt for fraudulent insurance policies.
On how that would affect the insurance sector, KTA stated, “As transporters opt for cheaper coverage, insurance companies would experience a significant decrease in revenue, potentially reducing tax contributions to the government.”
Meanwhile, the Motorist Association of Kenya (MAK) announced protests against the motor vehicle circulation tax on Friday, May 24, to be held in Nairobi.
