A first-year University of Nairobi student has called for the exclusion of motorcycles from the controversial motor vehicle circulation tax contained in the proposed Finance Bill 2024.
The student, Edwin Kamau, urged the Finance and National Planning Committee to consider amending the bill to exclude motorcycles due to the cost implications that stand to be borne by the end-users.
“ I want to urge this Committee to consider imposing the Eco Levy on the rate of carbon emission of one’s car. Also, amend the definition of motor vehicle to exclude motorcycles from the imposition of the motor vehicle tax,” Kamau submitted.
A newspaper columnist Mungai Kihanya further suggested that the motor vehicle tax was a good idea but had been poorly conceived.
“There’s something fundamentally wrong with taxing wealth when an asset is not changing hands,” Kihanya noted.
He added that the proposed tax should be collected every time a motor vehicle exchanges hands.
“I propose that we change the way the tax is collected. Could the tax be collected every time a vehicle is transferred to a new owner and that the rate then be increased from 2.5% to 4% of the last insured value,” Kihanya submitted.
In the proposed finance bill sponsored by Molo MP Francis Kuria who is also the Committee chair, all motor vehicle owners shall be required to pay a tax of 2.5 per cent of the value of their vehicles upon acquiring insurance covers.
Motor vehicle tax requirements
The law requires insurance firms to remit the monies collected from the motor vehicle owners to the state failure to which a penalty of up to 50 per cent on the collected amount shall be charged.
The tax proposes that motor vehicle owners pay 2.5 per cent of the value of their cars annually to the state. However, the maximum amount of tax payable on a given motor vehicle shall be capped at Ksh100,000 per year.
During similar submissions by members of the public, a Nairobi-based consulting firm, RSM urged the committee to increase the number of vehicles in the bracket of vehicles exempted from the tax.
In their plea on May 30, 2024, the firm noted that fire brigade vehicles, emergency rescue vehicles and individuals involved in the sale of motor vehicles should be exempted from the tax.
In its current state, the motor vehicle tax only exempts government vehicles, ambulances, National Intelligence Service (NIS) vehicles, police vehicles and those that belong to individuals exempted from tax in the Privileges and Immunities Act Cap. 179.
The motor vehicle tax proposal has particularly generated heated debates across the country with the latest being witnessed by Roads and Transport Cabinet Secretary Kipchumba Murkomen in Nyeri on Sunday, June 9, 2024.
During a church service at the AIPCA church in Nyeri Town, Governor Mutahi Kahiga said the motor vehicle circulation tax proposed in the finance bill was bound to flop.
Kahiga added that the state should avoid taxing Kenyans when it did not help them purchase the cars.
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