Government to Raise Ksh58 Billion from Kenyans Through New Motor Vehicle Tax

National Assembly Finance Chair Kimani Kuria detailed how the government plans to implement a proposed motor vehicle tax as outlined in the Finance Bill 2024.

In an interview on Citizen TV, Kuria, who presented the bill, disclosed that the government aims to collect Ksh58 billion in the first year through the new tax. He explained that the initiative is designed to generate revenue for the budget while also promoting investment in the public transport system. Below is an outline of the enforcement measures for the new tax on car owners.

Collection Mechanism

Under the proposal, motorists will be required to pay a motor vehicle tax at a rate of 2.5 percent of the car's value. This tax will be collected at the time of acquiring insurance coverage.

The tax will have a minimum threshold of Ksh5,000 and a maximum cap of Ksh100,000. Other factors affecting the tax amount will include the make, model, engine capacity, and year of manufacture of the vehicle.

"An insurer of a motor vehicle shall collect and remit the motor vehicle tax within five working days after issuing a motor vehicle insurance cover," the Finance Bill proposes. "An insurer who fails to collect and remit the motor vehicle tax shall be liable to pay a penalty equivalent to fifty percent of the uncollected tax and the actual amount of the uncollected tax."

Purpose of the Tax

Kuria explained that the tax aims to boost investments in the public transport sector. He noted that the high number of private vehicles has hindered foreign investments in public transport infrastructure, such as the Bus Rapid Transit (BRT) system, which has struggled to launch despite extensive planning.

Kuria also urged Kenyans to consider the broader implications of the Finance Bill rather than focusing solely on the motor vehicle tax, warning that this narrow focus could overshadow other important tax measures in the bill.

"The last Finance Bill became a conversation about the housing levy and VAT on fuel, and we missed out on 82 other clauses in that bill. Unfortunately, I see the same happening this year," he stated.