Kenyan President Uhuru Kenyatta has sent car prices in the country through the roof with nothing more than a stroke of a pen.
On November 7th, President Kenyatta signed into law the Finance Bill 2019, effectively scrapping capping of interest rates which was included in section 33b of the Banking Act and gave local banks a free hand to charge lending rates to their liking.
No sooner had he signed the controversial bill than its effects were felt across the country. The first casualty of Uhuru’s signature is car prices which have since shot through the roof.
“These are substantial tax hikes. Newer models are the hardest hit,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association-- which represents used car dealers, Business daily reported.
New and used car dealers say the tax changes has raised the cost of cars by between tens of thousands to more than Sh1 million, prompting a rise in retail prices by an equivalent margin.
Car prices have shot by more than Sh1 million ($100,000) following the introduction of new taxes for motor vehicles with engine capacities exceeding 1.5 litres.
Excise duty, one of the biggest taxes levied on motor vehicle imports, increased up to 35% effective Thursday after President Kenyatta signed the Finance Bill into law.
This has seen the prices of both new and used cars, trucks and buses, increase with taxes taking more than half of the vehicles’ retail costs.
In Kenya, vehicles usually attract an import duty of 25%, excise duty but that has since changed from 25% to 35%. An importer of a 1.8-litre Toyota Premio, which is seven-years old and running on petrol, will now pay total taxes of Sh452, 338 ($4523.38) up from Sh405, 385.
As per the Finance Act 2019, vehicles running on petrol and with engine capacities of more than 1.5 litres now attract excise tax of 25% compared to the previous 20%.
Similar vehicles running on diesel will pay excise duty of 35% from previous 30% that applied on models exceeding 2.5-litre engines and 20% on smaller cars going forward.
Used car dealers estimate that total taxes payable on a seven-year-old Toyota V8 running on a 4.6-litre diesel engine now stand at Sh2.1 million ($21,000) compared to the previous Sh1.9 million ($19,000), a rise of Sh190,711 ($1907.11).
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