Proposed Taxes to raise vehicle costs in Kenya

The Kenyan government is considering implementing a series of tax measures aimed at both wealth generation and environmental protection. 

These proposals could significantly affect the cost of purchasing and operating vehicles in the country.

In a draft medium-term tax revenue strategy, the government has outlined plans to gradually increase excise duties on cars that run on conventional fuels. 

Additionally, they are exploring the introduction of an annual wealth tax for vehicle owners, with the tax amount dependent on the engine capacity of the vehicle.

One of the noteworthy proposals is the potential introduction of a motor vehicle circulation tax, designed as a form of wealth tax. 

Under this scheme, motor vehicle owners would pay this tax annually when acquiring insurance coverage. 

The tax would consist of a minimum amount payable by all vehicle owners, alongside a graduated amount based on the engine capacity of the vehicle.

In a move to encourage the adoption of eco-friendly vehicles, the government is also considering raising excise taxes on imported vehicles that rely on fossil fuels. 

Simultaneously, they are contemplating reducing taxes on electric vehicles to promote a shift toward a more sustainable, green economy.

These proposed changes align with Kenya’s efforts to curb air pollution and reduce the environmental impact of transportation. 

They also complement earlier proposals outlined in the draft National Green Fiscal Incentives Policy Framework, which includes plans to charge motorists for driving into heavily congested urban areas.

One of the key components of this plan is the exploration of a congestion charge—a fee imposed on cars and motor vehicles driven within zones designated as heavy traffic areas.

While the government has not specified the exact fee levels, this initiative is expected to target cities like Nairobi, Mombasa, Kisumu, and Nakuru, with the aim of reducing carbon emissions and improving air quality.

As these tax proposals undergo further evaluation and potential implementation, Kenyan vehicle owners and the broader public will be closely monitoring their impact on vehicle costs, environmental sustainability, and overall economic implications.