Car dealers decry new KRA tax formula

Imported cars at a yard in Mombasa on November 24, 2017. Photo | Kevin Odit | NMG
Imported cars at a yard in Mombasa. Photo | Kevin Odit | NMG 

Car importers in the country have written to the taxman demanding suspension of the new Current Retail Selling Price (CRSP) that they say will lead to increased cost of second hand vehicles.

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

Calculation of taxes for a used car is based on the CRSP of specific vehicle models, which is then adjusted for depreciation at the rate of 10 per cent per year.

Insurance and freight costs are then added to CRSP to arrive at the custom value.

Car dealers are opposed to the new tax regime which they say should not be implemented until pending issues are resolved.

“We wish to register our humble request to you that since we have not resolved 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,” the letter addressed to the commissioner in-charge of Customs and Border Control and copied to the KRA Commissioner-General says in part.

No response

Speaking during an interview in Mombasa Wednesday, Mr Otieno says the lobby has been reaching out to KRA but that it is yet to respond.

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

He expressed fear that the move would soon bring the industry to its knees as many dealers will close shop.

“Taxation laws should not deprive citizens of their property.”

High end cars

The new taxes will see high end models like the Toyota Land Cruiser URJ201/202-GNT V8 (5663) cc 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 duty, translating to a 20 per cent increase.

The Lexus R450 (3500) cc will now retail at Sh11.5 million and attract a duty of Sh 1.2 million. Last year the same model retailed at Sh6.9 million and attracted a duty of ShSh768, 127, a 63 per cent increase.

A Honda CRV RM4 (2400) cc will now retail at Sh7.3 million while attracting a duty of Sh801,719, a 25 per cent increase from last year.

In 2017, the same model retailed at Sh5.8 million with a duty of Sh641,296.