Tigania West MP John Mutunga is advocating for a targeted approach to the motor vehicle circulation tax, suggesting that it should only apply to individuals who own more than one car.
Speaking during a TV interview, the MP highlighted the essential role of cars in Kenya due to the inadequacies of the public system, hence he advocates for the taxation of second car acquisitions, labeling them as luxuries.
“Speaking as a member of Parliament, our votes reflect the desires of our people. In conversations with Tigania West residents about the motor vehicle tax, they’ve voiced opposition to taxing the first car. They advocate for encouraging car ownership by eliminating the levy on initial vehicles. According to them, it’s only fair to impose taxes on extra cars, as those are considered luxuries,” the MP stated.
The contentious proposal in the draft legislation aims to implement an annual tax to be collected upon obtaining motor vehicle insurance coverage. This levy, ranging from a minimum of Ksh.5,000 to a maximum of Ksh.100,000, will be calculated at 2.5 percent of the vehicle’s total value.
Mutunga confirmed his intention to present his suggestions to the National Assembly’s Finance and Planning Committee, which is actively soliciting feedback from various stakeholders regarding the 2024 Finance Bill.
“We’ll present these proposals in the House, and I’m confident they’ll be considered,” stated Mutunga. “If they’re not included in the committee’s final report, I’ll introduce them as an amendment.”
According to the proposed legislation, ambulances and vehicles owned by the government are exempt from the motor vehicle circulation tax, as outlined in the Privileges and Immunities Act.
If an underwriter fails to collect and remit motor vehicle tax within five working days of issuing motor vehicle insurance cover, they shall incur a penalty equal to 50 percent of the uncollected tax, in addition to the unpaid tax amount.
At present, the comprehensive motor vehicle insurance premium rate is set at 5 percent. With the proposed additional 2.5 percent, the premium would rise to 7.5 percent. Insurance providers caution that this increase may prompt motorists to switch to third-party insurance covers as they contend with escalating living expenses.
However, the draft law has faced opposition from various groups, including the Association of Kenya Insurers, which informed the parliamentary committee on Monday that the tax’s implementation would harm not only the insurance industry but also related sectors.
