Court Ruling That'll Make it Cheaper to Own a Car

  • Imported cars at the Port of Mombasa on October 28, 2018. A High Court in Mombasa ruled that the current system of taxing second-hand cars was unfair. Daily Nation
  • A High Court in Mombasa ruled against the tax imposed on second-hand cars by the Kenya Revenue Authority (KRA), terming it illegal.

    Business Daily reported on Tuesday, October 22, that KRA's current calculation of taxes imposed on the vehicles was declared unfair.

    Car Importers Association of Kenya had filed a case at the court noting that the current retail selling prices (CRSP) were inflated, resulting in an unfairly higher taxes running into millions of shillings.

    KRA building in Nairobi. The High Court in Mombasa on Tuesday, October 22 ruled that the tax on used cars was unfair to the dealers. Photo: Daily Nation.
    KRA building in Nairobi. The High Court in Mombasa on Tuesday, October 22 ordered the tax collector to formulate new metrics to calculate the tax payable for second-hand vehicles. 

    Justice Eric Ogola ruled that the CRSP was unconstitutional and that KRA should have consulted with the importers when creating the price list.

    "A declaration that for the purpose of continuity and in the interest of the public, the transactions already effected via the said CRSP shall continue to apply until such a time as the respondents (KRA) will establish a new CRSP value in accordance with the law, within 12 months from the date of this judgement," Ogola ruled.

    Second-hand car dealers argued that the prices supplied by vehicles sellers to KRA were sometimes higher than the actual showroom prices.

    "Taxes on some models have been unfairly high. We have been telling KRA that the sources for the CRSP are interested parties who inflate the prices," argued Charles Munyori, the secretary general of Kenya Auto Bazaar Association.

    The court also heard that some dealers were reported to have abandoned their cars at the port, due to the high levies.

    Al-Husnain Motors, one of the affected dealers, revealed that they had imported a Toyota Land Cruiser V8 running on a 4.6-litre petrol engine. The entreprise paid Ksh4.1 million in tax derived from a retail price of Ksh14.1 million for a similar model in Kenya.

    KRA demanded more taxes from Al-Husnain as the authority concluded that the car should have been taxed based on the higher selling price of Ksh17.9 million for a Toyota Land Cruiser VX.

    "This court is satisfied that the respondents have no legal mandate to extract more taxes from Al-Husnain Motors on the basis of Facebook website data, or data offered by Toyota Kenya who are the petitioner's competitors," Judge Ogola continued.

    Ogola also disclosed that if the current tax process continues, it would promote bias, unfairness and discrimination in taxes due.

    Cars at the Mombasa port.
    Cars pictured at the Mombasa port on November 21, 2018. Photo: Daily Nation.