By David Wanjala
December 2015 saw the Excise Duty Act approved and adopted to become a law. It got a little bit difficult for people who wanted to buy their first cars. And so in the spirit of business the importers pass the cost on to customers, bringing an issue that is all about high cost of importing a vehicle.
From July to November last year, car imports reduced by half as players adopted a wait and see attitude. Back then figures from Car Importers Association of Kenya indicated that monthly imports dropped from an average of 12,000 units to as low as 3,000 units.
As the reality of the tax sinks deeper what is on the ground is that a lot of people, especially those who luck strong financial muscle to buy new cars, are trying to find more cash to spend in imports.
The impact of the change of duty has been real as it has made luxury vehicles cheaper to import begging the big question, why should an ordinary Kenyan (who just want a car for moving from point A to B) start importing Land cruisers and Range Rovers? Should you close your eyes and buy a luxury car and pay through your nose to maintain it?
The Excise Duty was 20% of the Excise Value. But with the new law it will no longer be a percentage of the Excise Value. It is now a fixed rate of Sh200,000 for cars that are over 3 years old from the date of first registration with some players seeing some ray of hope that it could be fixed at Sh150,000 for newer vehicles. No economic policy should encourage buying of luxury cars. This is not being fair to the middle class. Reality is that it will generate something like a silent epidemic as importing cars will increasingly become a thing for the wealthiest in town.
It is true that Kenyans are digging deep in their pockets. Picture this: cars whose Current Retail Selling Price, as set by Kenya Revenue Authority value at over Sh6,000,000 will benefit more as the Excise Duty when at 20% (as it was before) is more than Sh200,000. It is currently fixed at Sh200,000. That means duty payable for a 2008 Land Cruiser V8 has dropped by over Sh100, 000. So, if a vehicle costs Sh500, 000 how are the calculations done for it to reach Sh1 million?
It is a fact that if the bill comes to law, buying motor vehicles valued from Sh300,000 to Sh450,000 at a levy of 200,000 will push up costs. Single cab pick-ups, closed vans as well as trucks were all exempt from the excise duty before. That too has changed. The current valuation template on KRA website updated 1st December confirms this bit which have left some investors pensive.
This may impact negatively on the trade, and at the same time will strain the budget of first time buyers. Although a step in the right direction for a government aiming at reducing carbon emissions, which is higher in older cars, the change in tax will kill middle class big time. We need not turn a blind eye. It is time we looked at the other sides of the track as a lot of Kenyans are just ordinary people.
