The proposed 2024 Finance Bill has introduced several new taxes, the key among them being the motor vehicle tax. Unlike other Finance Bills that have been tabled on the floor of the house, this one seeks to introduce a 2.5% annual tax on the value of cars possessed by Kenyans.
If you own a car, you will be expected to part with at least ksh.5000 and not more than ksh.100000 on an annual basis based on the value of your car. The newly introduced motor vehicle tax will be paid on your car once you get a new insurance cover.
With all this proposal in place, questions linger on whether the new motor vehicle tax is a blessing or a curse to Kenyans and the government in general. To get a clear perspective, read the article below, and you will be good to go. The proposed motor vehicle tax is a curse due to the following reasons:
1. It is Expensive for Motorists
If the above-mentioned proposal is not amended before the gazettement of the Finance Bill 2024, Kenyan motorists will have to dig deeper into their pocket, considering they have to part with more bucks on top of their usual insurance covers that they take annually.
Depending on the value of your car, this cost is bound to rise, thereby hurting your budget in the long run. If you are always on a budget when it comes to motor vehicle expenses, you have to look for alternative ways of earning an income to cater for the newly introduced motor vehicle tax.
Matatus in a bus stop
2. Suppress the Uptake of Comprehensive Insurance Covers
When it comes to insurance coverage, most Kenyans prefer comprehensive covers for their motor vehicles, which come with many perks. According to AKI CEO Tom Gichuhi, if the new motor vehicle tax proposal passes, the insurance industry will suffer as the uptake of comprehensive insurance is bound to reduce drastically.
This is a big blow to the industry considering the fact that the insurance sector has witnessed significant growth from 2.2% in 2020 to 2.3% in 2022. From the agents to reinsurance brokers, several intermediaries will be hurt by this proposal.
3. Increased Pressure on the Public Transport Sector
Since the motor vehicle tax will be expensive for most motorists, a good number of them will opt to use public transport to commute from one place to another. According to Patricia Mutheu, CEO of Matatu Owners Association (MOA), the public transport system in Kenya is on the verge of collapsing, thanks to corruption and dilapidated infrastructure.
If car owners shift to public service vehicles, the sector might be adversely affected, suppose the current issues facing it are not solved in the first place.
Summary
Although the new motor vehicle tax proposal might enable the government to collect Ksh. 58 billion to finance the proposed budget of 3.9 trillion, which is bound to cause more pain to Kenyans.
From making Kenyan motorists pay higher premiums alongside their usual insurance covers to mounting pressure on the already straining public transport sector, the new proposal is likely to cause many problems. If the proposal passes, brace yourself to grapple with the above-mentioned issues.
