Motorists announce protests over vehicle circulation tax

By , K24 Digital
On Thu, 23 May, 2024 13:45 | 3 mins read
Traffic snarl-up on Thika Road. PHOTO/@Ma3Route/X.
Traffic snarl-up on Thika Road. PHOTO/

Motorists Association of Kenya has announced plans to stage peaceful protests over the proposed motor vehicle circulation tax in the 2024 Finance Bill.

In a notice on Thursday, May 23, 2024, the association noted that it intends to hold its protests on Friday, May 24, 2024, pending approval from the security officers.

The Motorists Association of Kenya, an umbrella body for drivers and vehicle owners earmarked the Aga Khan Walk between Kenya Re and Kenya Power as their designated point of protest.

In the notice, they argued that the government intends to impose a 2.5 per cent motor vehicle circulation tax in the next financial year which they had previously opposed indicating that it will gravely affect the sector.

Kenya Revenue Authority (KRA) Headquarters. PHOTO/Dennis Onsongo
Kenya Revenue Authority (KRA) Headquarters. PHOTO/Dennis Onsongo.

The proposed legislation contained in the Finance Bill 2024 seeks to introduce an annual tax that will be paid during motor vehicle insurance coverage acquisition. Set at a minimum of Ksh5,000, the levy will be 2.5 per cent of the vehicle’s value.

Motor vehicle owners will be required to remit the tax to the insurer five days after acquiring an insurance cover.

"We hereby notify you of a peaceful protest against the 2.5 per cent proposed motor vehicle tax that will be effective from July 1 2024 if it is approved and becomes law," the Motorist Association of Kenya stated.

"The protest will take place on Friday, May 24, 2024, on Aga Khan Walk between Kenya Re and Kenya Power between 10:00 am to 11:00 am. We'll have around 100 people. It will be a peaceful protest with decorum."

Transporters also oppose

Trucks on transit. PHOTO/Freight Logistics Magazine.

However, according to the umbrella body, the police are yet to approve their protest slated for Friday, May 24, 2024. On the other hand, the transporters have also opposed the proposed tax measures terming them as punitive.

"The Kenya Transporters Association (KTA) urges the National Assembly to reject this tax. Its implementation would significantly increase operational costs, potentially forcing many transport businesses to close," the transporters stated.

"Transporters already face substantial tax burden on vehicles during the purchase, including import duty, excise duty, VAT and levies for import declaration and railway development," they further argued.

They warned the government that this new policy would discourage investment in the sector.

Insurers stance

The planned protest comes days after insurers expressed their reservation about the planned introduction of the motor vehicle circulation tax. The Association of Kenya Insurers (AKI) appealed to lawmakers to throw out the proposal due to its expected outcome in the sector.

Insurers argued that if the Bill gets the green light in parliament, vehicle owners will abandon premium covers and opt for third parties due to the high cost of living in the country.

“With motor vehicle insurance being compulsory in Kenya, we anticipate a major shift towards third-party motor insurance if this tax is implemented. Consequently, motorists will face higher risks, as they will essentially only be covered for third-party liabilities, leaving their vehicles unprotected in the event of accidents,” AKI executive director Tom Gichuhi stated on Friday, May 17, 2024.

According to the Bill, insurers and motor vehicle owners who fail to remit the stipulated amount would be subjected to a penalty of 50 per cent of the uncollected tax and the actual amount of the uncollected tax.

However, government-owned vehicles and ambulances will be exempted from the motor vehicle circulation tax if it is approved by both houses and signed into law by President William Ruto.

The Finance Bill 2024 sponsored by the leader of the Majority Kimani Ichung'wah is currently under public participation before MPs start debating on its various proposals.

Deliberation on the Finance Bill 2024 is likely to be delayed after Busia Senator Okiya Omtatah moved to court on Wednesday, May 22, 2024, to stop Parliament from considering the taxation measures proposed by the Kenya Kwanza administration to finance the 2024/25 budget.

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