A review of the country's performance in the Financial Year 2022/2023 published by the Treasury shows that there was a decline in car imports and consumption of other luxury goods.
The Budget Review and Outlook Paper released on Thursday, observes that the decline in the importation of vehicles led to a decline in the collection of excise duty.
Notably, there was a 3 per cent drop in car imports between January - March 2023. This is backed by data published by the Kenya National Bureau of Statistics (KNBS) which shows that Kenyans imported 63,990 units in the first quarter of 2023 compared to 65,801 units at the same period last year.
Imported oil volumes also declined, which can be attributed to many Kenyans opting to leave their cars home owing to high fuel prices which have been on the rise since September 2023.
According to the report, the country failed to meet its excise duty tax target by Ksh29.5 billion.
The drop in excise duty can also be attributed to a decline in consumption of beer, spirits and the use of cosmetic products.
Initially, it had been projected that the country would collect Ksh293 billion from July 2022 to June 2023.
On the other hand, the construction industry was also hit with taxes that saw the prices of basic commodities shoot up.
"Domestic Value Added Tax (VAT) collection was mainly affected by subdued growth in the construction, transport and manufacturing sectors owing to the high cost of inputs and increasing inflationary pressures," read the report in part.
"The decline in VAT imports is explained by non-oil imports where the volumes of containerized cargo dropped by 8.4 per cent mainly influenced by changes in buying patterns given the import price pressures."
Out of the Ksh297 billion that was targeted to be collected on domestic VAT during the past financial year, the country only realised Ksh271 billion.
The prices of some construction items such as steel have been on the rise since January. For instance, in January, the prices of steel rose by 30 per cent owing to a slowdown in production occasioned by the conflict in Ukraine and Russia.
The two countries are some of the leading exporters of steel to Kenya.
