In a recent media interview, Molo MP and National Assembly Finance Committee Chairperson Kuria Kimani shed light on the government's new motor vehicle circulation tax.
- The Finance Bill 2024 proposes a 2.5% motor vehicle circulation tax
- MP Kuria Kimani explains it as a hybrid tax between income and wealth tax
- Strategy to attract foreign investment for Kenya's public transport
The Finance Bill 2024, proposes a motor vehicle circulation tax will be charged at 2.5 per cent of the vehicle’s value and will be paid annually when renewing a vehicle’s insurance.
The proposal, which aims to enhance public transport infrastructure, has already sparked significant controversy among motorists.
When asked if the motor vehicle circulation tax is an income tax or a wealth tax, Kimani Kuria explained that it is a hybrid between the two.
He stated, “It’s a user-pay tax. If you don’t want to pay for the motor vehicle tax, then don’t use a car.” Kuria likened this to the Nairobi Expressway toll fees, where drivers can choose to use alternative routes like Mombasa Road if they prefer not to pay.
Encouraging Investment in Public Transport
Kimani highlighted the broader goal of the tax, to attract serious foreign investment into Kenya’s public transport system through private-public partnerships (PPPs).
“The impact of this will be to encourage investment in elaborate public transport,” he said.
He pointed out that in more advanced economies, efficient public transport systems attract significant investments.
However, feasibility studies in Kenya have shown a preference for personal car use, deterring potential investors.
READ: Matatu owners to transform Nairobi transport sector with Sh2.5 billion plan
Public Transport vs. Private Cars
Kuria questioned why Nairobi lacks efficient rail transport, suggesting that the answer lies in the country’s inadequate public transport options.
He noted that despite previous attempts to improve public transport, such as the Bus Rapid Transit (BRT) system on Thika Road, there is a cultural resistance to using public transport.
“There seems to be a behavioural issue in Kenya where if I sit in a matatu or public transport, then I don’t seem as bougie, you know… I really want to drive my car,” he observed.
E-mobility boom
Drawing a comparison to past initiatives, Kuria mentioned the zero-rating of assembling electronic motorcycles and electric bicycles in the Finance Bill 2023.
This policy has led to significant investments in e-mobility, exemplified by companies like eBee.
He expects a similar outcome for the motor vehicle tax which is contained in the Finance Bill 2024, predicting substantial investment in public transport infrastructure in the coming months.
Motorists Reject Motor Vehicle Tax
Despite the government's optimistic outlook, many motorists have already rejected the proposed tax.
They argue that it unfairly targets car owners and fails to address the underlying issues of public transport inefficiency.
Critics claim that the tax will place an additional financial burden on citizens without guaranteeing improvements in the public transport system.