Finance Bill 2024: MPs Vow To Pass 2.5% Motor Vehicle Tax Amid Resistance

• The Finance Bill 2024 proposed a 2.5% motor vehicle circulation tax to raise funds for the 2024/25 budget
• National Assembly Finance Committee chair Kuria Kimani said the proposed levy will fetch the Treasury over KSh 58 billion
• The Molo MP hinted that the committee is not ready to offset the tax, noting that if it is removed, it will affect the budget

TUKO.co.ke journalist Wycliffe Musalia brings over five years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

Car owners will have to part with the proposed 2.5% motor vehicle tax in the Finance Bill 2024.

The National Assembly Finance Committee vowed to pass the controversial tax, despite resistance from industry players.

Why MPs want to pass motor vehicle tax

The committee, led by Molo MP Kuria Kimani, argued that scrapping the tax will dent the 2024/25 budget.

Kimani warned that removing the tax will reduce the budget by KSh 58 billion.

"If we have to get rid of the tax, we will be reducing the budget by KSh 58 billion. Now the problem is, no one, at least from the political side, wants the budget to be reduced," said Kimani.

The committee hinted at brushing off recommendations from the industry players led by the Association of Kenya Insurers (AKI).

Why Kenya insurers are opposing motor vehicle tax

In its submission to the committee, AKI maintained that the tax, capped at a minimum of KSh 5,000 and KSh 100,000, will overburden Kenyans.

"You are bringing in an additional cost of another KSh 100,000. In the first place, we were not able to pay the KSh 200,000 instantly. But the tax has no room for instalments. We are punishing Kenyans," said AKI CEO Tom Gichui.

Gichui reiterated that insurance companies' contribution to the GDP will be impacted as most car owners will resort to dubious means.

Earlier, AKI raised concerns that most motorists on comprehensive cover will opt for third-party cover, which is risky for them in case of an accident.

What's the alternative to motor vehicle tax?

The Kenya Private Sector Alliance (KEPSA) called for a KSh 1 additional tax on fuel levy instead of the motor vehicle tax.

KEPSA urged the parliament to spare insurers the burden of enforcing the levy and pass it on to the Kenya Revenue Authority (KRA) and the National Transport and Safety Authority (NTSA).

The Bill proposed a fine to insurers should they fail to submit the required levy.

It stipulated that insurance companies that will not collect and remit the tax risk a penalty of 50% of the tax and the actual amount of the uncollected tax.

Proofreading by Mercy Nyambura Guthua, journalist and copy editor at TUKO.co.ke