Molo Member of Parliament and Chairperson of the National Assembly Finance and Planning Committee Francis Kuria Kimani has defended the proposed Motor Vehicle Circulation Tax.
The Finance Bill 2024 proposes the introduction of a 2.5 per cent annual tax on the value of vehicles, with the deduction set at a minimum of Sh5,000 and a maximum of Sh100,000.
The controversial deduction will be paid on each vehicle at the time of issuing an insurance cover.
Speaking during an interview with NTV on Tuesday, May 14, 2024, he said the new deduction is a hybrid between income tax and wealth tax.
“It is also trying to factor in a user-pay tax, or a levy…we are saying fine ‘I don’t want to pay the vehicle circulation tax’, then don’t use the car, like we are saying ‘I don’t want to use the expressway’, so don’t pay for it, go through other means,” he explained.
Kimani added that the overall effect of the tax will be to encourage investment in elaborate public transport.
“Every time we have had investors wanting to invest in public transport through PPP, the feasibility studies have shown that we like to drive our cars so much that we are not able to attract foreign investment to our public transport…why don’t we have rail transport in Nairobi CBD? why do I feel the need to drive my car? is because we don’t have an elaborate public transport,” he said.
The Insurance Act makes it mandatory for every car on the Kenyan public road to have a minimum of a third-party motor insurance cover in place.
Tying the motor vehicle tax with insurance means it is going to be difficult to escape the tax.
The bill proposes a penalty of 50 per cent of the uncollected tax on insurers who fail to collect and remit the motor vehicle tax to KRA. They will then be required to remit the actual amount of the uncollected tax.
The Kuria Kimani committee has launched a public participation exercise inviting members of the public to submit comments on the 2024 Finance Bill. The deadline for submissions is Tuesday 28th 2024.
