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The Finance Bill 2024 is proposing a Motor Vehicle tax at the rate of 2.5 percent on the value of the motor vehicle payable at the time of the insurance cover.
Many people have voiced and I would want to conquer that this draconian proposal should be struck out to save the automative industry as well as guarantee sustained business in motor insurance business.
In this badly thought idea,the government targets to collect Sh58 billion without considering the negative trickle down effects.
Getting down to it,the bill proposes a minimum of Sh5,000 and a maximum of Sh100,000 per annum.The danger in it is a further proposal that the tax is to be collected by the insurer and remitted to the KRA Commisioner General and strictly within five working days after the buyer has obtained the insurance cover.The bill goes ahead to threaten insurers that they will be liable to a late payment penalty equivalent equivalent to 50 percent of the uncollected tax.
The initial thinking among many Kenyans was that this proposal targets the rich and spairs the average working Kenyan but that is not the case.
This proposal is going to make it difficult for young middle class Kenyans to own cars,reduce motor insurance and scare further investment in the insurance industry.
Remember this bill seeks to impose on Kenyans a Value Added Tax (VAT) on bank transactions and raise excise duty to 20 per cent from 15 per cent.
Parliament should amend the proposal and leave it at one percent of the vehicle’s value considering most first car owners in Kenya borrow to acquire one and would shy away if we allow more punitive taxes.
The Finance Bill, 2024 seeks to impose Value Added Tax (VAT) on bank transactions and raise excise duty to 20 per cent from 15 per cent yet most first car owners in Kenya borrow to acquire the asset.
If one applies for a loan facility to finance the vehicle, they will pay VAT on transactions at 16 per cent on top of a raised excise duty of 20 percent.
Meanwhile I support the proposal by Kenyans to have a bill that creates an equitable financial system that pioritises the needs of the economically disadvantaged,promotes inclusivity , growth and sustainable development.
It is good that we have tax reforms that provide a fair contribution from all income groups while relieving the tax burden on low-income earners.
Let us plan on how to lower VAT on essential goods to directly reduce the cost of such items for consumer impact.
