Car prices to rise as importers decry new KRA tax system

Motor vehicle importers in Kenya are raising alarms over a recent shift by the Kenya Revenue Authority regarding the valuation of imported units. The industry argues the new approach has resulted in significantly higher duty charges, which will soon be passed on to consumers.

The importers, who remain a critical link in the country’s transport and logistics infrastructure, claim the tax collector has moved to a system that inflates the base value of vehicles. This change affects the final retail price for cars arriving at the Port of Mombasa.

Industry players fear that the sector could be adversely affected as the cost of ownership climbs beyond the reach of many Kenyans. They argue that the current valuation method lacks consistency, leading to unpredictable clearing costs for businesses.

Historically, the tax man used the Current Retail Selling Price as the benchmark for calculating duties. However, the recent pivot has sparked friction between the state and the Car Importers Association of Kenya over how these figures are reached.

The shift comes at a time when the government is under pressure to broaden the tax base. President Ruto has previously emphasized the need for Kenya to increase its internal revenue collection to fund development projects and manage the national debt.

For the construction and logistics sectors, which rely heavily on commercial vehicle imports, the increased taxes represent a potential hike in operational overheads. Heavy machinery and transport trucks are often subject to similar valuation scrutiny at the port.

Importers have called for a more transparent engagement process to ensure that tax assessments reflect the actual market value of vehicles. They warn that without a review, the volume of imports could drop as buyers retreat from the market.

Under the current regulations, vehicles are taxed based on their engine capacity, age, and the assigned customs value. If the KRA maintains the higher valuation benchmarks, the ripple effect will likely hit the second-hand car market the hardest.

The Kenya Revenue Authority has often defended such moves as necessary to curb under-declaration of cargo value. Discrepancies between invoices provided by importers and the KRA valuation database have been a long-standing point of contention in trade circles.

As the standoff continues, clearing agents report that dozens of units are staying longer at the port as owners struggle to raise the additional funds required for clearance. This delay further adds to the cost through storage and demurrage fees.

The automotive sector remains a key contributor to the national treasury, and any prolonged slump in sales could impact the projected revenue targets for the current financial year. Importers are now seeking an audience with the Ministry of Treasury to address the valuation gaps.