Second hand car importers say new tax by KRA punitive

Car importers have written to the Kenya Revenue Authority (KRA) demanding the suspension of the new formula for calculating tax, saying it could make second-hand vehicles more expensive.

In a letter dated January 30, Car Importers Association of Kenya (CIAK) chairman Peter Otieno said KRA took the decision without involving them as players.

The association said the new tax regime, based on the current retail selling price (CRSP), should not be implemented until pending queries are resolved.

The letter is directed to commissioner in-charge of the Customs and Border Control department and copied to the KRA commissioner general.

RESOLVE DISPUTE

“We wish to register our humble request to you that since we have not resolved even the disputed values that were put to the attention of your department earlier, we hereby appeal that you suspend the CRSP that is due to be implemented with effect from February 5 until we agree so that CRSP becomes ours for all and not KRA alone,” said the letter.

Speaking in an interview in Mombasa on Wednesday, Mr Otieno said the association has been reaching out to Valuation and Tariff department at KRA because of values they were uncomfortable with but the authority has not responded.

“We cannot be in business if taxes suddenly increase to almost 68 percent. That is unacceptable and this is happening even after our several engagements with KRA who have failed to listen to our grievances,” Mr Otieno added.

NO TAXATION BASIS

Mr Otieno said KRA normally targets vehicles that are imported in bulk hence increasing their values without basis as some are priced higher than even those being sold locally.

“As an association, we believe that a unit which was manufactured in 2011 cannot be, by all means, higher (in price) than a vehicle currently in production,” he said.

“Taxation laws should not deprive citizens of their property. By imposing tax burdens, our fear is that this industry will soon be on its knees as many will close shop.

“We believe that when a particular vehicle was being sold at Sh1.8 million in 2011, seven years later in 2018, the value won’t increase but decrease due to the new models flooding the market which are of new technology and more efficient than the old models,” said the letter by the importers association.

BENCHMARK

In 2004, the association met KRA officials and argued that the authority should collect CRSP from local dealers to be used as benchmark.

The association has objected to the 43 percent tax on used motor vehicles being imposed by KRA which took effect on February 5.

The new taxes will see high end models like Toyota Land Cruiser URJ201/202-GNT V8 5663cc retail at Sh21.6 million and attracting a duty of Sh2.3 million.

In 2017 the same model was selling at Sh17.9 million and attracting a Sh1.9 million, which is a 20 percent increase.

Lexus R450 3500cc will now retail at Sh11.5 million and will attracting a duty of Sh1.2 million.

Last year the same model retailed at Sh6.9 million and attracted a duty of Sh768, 127, an increase of 63 percent.

Honda CRV RM4 (2400) cc will now retail at Sh7.3 million attracting a duty of Sh801,719, a 25 percent increase from last year. In 2017 the same model retailed at Sh5.8 million attracting a duty of Sh641, 296.