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New tax proposal targets motor vehicle owners 

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Imported Vehicles at the Port of Mombasa. PHOTO | KPA

The National Treasury has proposed to introduce a new tax targeting vehicle owners who will be required to pay Motor Vehicle Circulation Tax whenever they buy insurance cover annually, if parliament adopts the suggestion.

Under the proposal that is contained in the draft 2023/2024 budget, the Motor Vehicle Circulation Tax will be based on the value of the vehicle determined by the make, model, engine capacity and year of manufacture.

Treasury says the tax which will be classified as a wealth tax, will be paid annually.

If adopted, the government will rely on the renewal of insurance policies as a mechanism to ensure the implementation of the tax.

In the event an underwriter fails to collect and remit motor vehicle tax within five working days after issuing of motor vehicle insurance cover, they shall be liable to pay a penalty equivalent to fifty percent of the uncollected tax and the actual amount of the uncollected tax.

Ambulances, and government owned vehicles are however exempt as enshrined in the Privileges and Immunities Act.

The motor vehicle circulation tax will be levied concurrently with the carbon tax which will be introduced to discourage the use of fossil fuels, in new measures to discourage air pollution.

Regina Manyara
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