The National Treasury has proposed introducing a Motor Vehicle Circulation Tax which will target Kenyans buying cars at the point of acquiring an insurance cover.
In its Medium Term Strategy for the Financial Years 2024/2025- 2026/2027, the National Treasury said the levy, which will be classified as a wealth tax, will be paid annually.
According to Prof. Njuguna Ndung'u-led Ministry, Kenyans will start paying the tax once the buyer gains full ownership of the vehicle.
“There will be a minimum tax amount payable by all motor vehicle owners in addition to a graduated amount based on the engine capacity of the vehicle” the document read in part.
According to the Treasury, the motor vehicle circulation tax will be levied concurrently with the carbon tax which will be introduced to discourage the use of fossil fuels.
The government sees the tax as a solution that will address two problems simultaneously namely; netting revenue and stopping air pollution.
“Government will explore the possibility of introducing a carbon tax based on the carbon content of fossil fuels,” the Treasury explained in the document.
According to the document, the government will introduce excise taxes gradually and will be phased over the life of imported vehicles.
Instructively, the government is looking at introducing excise tax on tractors, forklifts, excavators and earthmovers
To achieve its objectives, the government is also seeking to introduce tax incentives that promote the use of green energy.
Similarly, the government is also seeking to review the current taxes on electric vehicles that are environmentally friendly to support the transition into a green economy.
