Economy

Crackdown nets Sh64m worth of illegal foreign cars

cars

Second hand cars being offloaded from a Cargo Ship at the Port of Mombasa. FILE PHOTO | NMG

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Summary

  • The taxman multi-agency findings show the value of motor vehicles seized jumped from Sh400,000 the previous quarter after President Uhuru Kenyatta ordered a crackdown on illegal use of foreign number plates.
  • Kenya’s strict age limits on car imports and high import taxes has made shipping vehicles into the country expensive, creating a lucrative backdoor market for cars meant to be transshipped to regional neighbours.
  • The KRA also recorded higher interceptions of illegal cigarettes, mobile phones, clothing and petroleum products.

The Kenya Revenue Authority (KRA) seized cars worth Sh64.5 million in the crackdown on vehicles with foreign number plates in the three months to March, pushing the value of illegal goods confiscated in the period to March to Sh570.7 million.

The taxman multi-agency findings show the value of motor vehicles seized jumped from Sh400,000 the previous quarter after President Uhuru Kenyatta ordered a crackdown on illegal use of foreign number plates.

Kenya’s strict age limits on car imports and high import taxes has made shipping vehicles into the country expensive, creating a lucrative backdoor market for cars meant to be transshipped to regional neighbours.

The KRA also recorded higher interceptions of illegal cigarettes, mobile phones, clothing and petroleum products.

“Quarter three which starts in January kicked off on a high note following a crackdown on motorists illegally using vehicles with foreign number plates. The crackdown was conducted on 12th January and 13th January 2022 in collaboration with other agencies thus an increase in the number of motor vehicles seized,” KRA said.

Kenya which currently only allows the importation of vehicles up to eight years, has the strictest regime on the age limit of used cars in the region.

Tanzania allows imports of cars as old as 10 years while Burundi, Rwanda and South Sudan, on the other hand, have no formal age limits for used cars.

It was only in 2018 that Uganda passed a law limiting importation of vehicles manufactured more than 15 years earlier.

Uganda Revenue Authority (URA) on April 1, 2022, announced that effective July 1, 2022, there will be a non-clearance of motor vehicles of nine years and above under the warehousing regime.

The different set of age limits within the region has fuelled tax and regulatory arbitrage to ship in cheaper and older cars.

Many Kenyans are reportedly involved in a tax and regulatory arbitrage to ship in cheaper and older cars.

Most of the used cars coming from Uganda, though cheaper, are much older than those in the Kenyan used car market because of Kampala’s more relaxed age limit on its imported second-hand vehicles.

This implies that one can ship in a much older car through Uganda, declare low custom value and pay much lower taxes compared to direct importation into Kenya where used cars aged more than eight years cannot be allowed in.

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