Kenyans relying on Public Service Vehicles (PSVs) could soon be hit with a steep increase in price for daily commute if the proposed amendment of the Income Tax Act introducing Motor Vehicle Tax is adopted as envisioned in Finance Bill 2024, operators warned.
PSV operators have told legislators that they risk seeing their expenditure on taxes and levies on the first year of acquiring a new vehicle shoot to as high as 74 percent of the purchase cost should the proposed Motor Vehicle Tax sail through in its present form.
In its submission before the National Assembly’s Finance and Planning Committee regarding Finance Bill 2024 proposals, the Federation of Public Transport Sector argues that 33-seater mini-buses and 51-seater buses will take the hardest hit with year one taxes and levies, including Motor Vehicle Tax, standing at an estimated Sh4.9 million against the prevailing average purchase price of Sh6.6 million for the 33-seater and an estimated Sh6.3 million for the 51-seater averaging Sh8.5 million in the purchase price.
This means that for 33-seater mini-buses, year-one taxes, and levies will be at 74 percent of the cost of a newly acquired unit.
“The Federation of Public Transport Sector would like to call on all Kenyans and especially the National Assembly to reject the proposed Motor Vehicle Tax on concerns that it will drastically push up the cost of acquiring a PSV and increase the cost of doing business. To avoid losses, public transport operators who often operate a fleet of vehicles will certainly pass this cost to passengers,” the federation told the Finance and Planning Committee.
According to the federation, a 14-seater fetching an average of Sh5.3 million will attract 69 percent of its unit cost, or just about Sh3.7 million, in year one taxes and levies, while a 51-seater fetching an average of Sh8.5 million will attract 74 percent of its unit cost in year one taxes and levies at just about Sh6.3 million.
The federation has also cast doubts over the proposed use of insurance companies as collecting agents for the tax proposed via the introduction of Section 12H to the Income Tax Act.
“Due to the current poor health and hygiene of insurance companies that underwrite the risk of PSV transport, it will not be prudent to entrust them to collect Motor Vehicle Tax on behalf of government yet they cannot pay claims, let alone them being going concerns. The cost and process of carrying out the annual valuation will lead to corruption”, the federation says.
The government targets collecting Sh58 billion in the financial year 2024/25 through the Motor Vehicle Tax which has been proposed at 2.5 percent of the value of a vehicle with the floor set at Sh5,000 and the ceiling set at Sh100,000.
