Car dealers move to court over raised taxes

Second hand cars at the Mombasa port. File photo | nmg
Second hand cars at the Mombasa port. File photo | nmg 

A legal dispute is brewing between second-hand motor vehicle importers and the Kenya Revenue Authority (KRA) over its rebased taxation that raised duty payable by dealers.

Under the Car Importers Association of Kenya, importers say in their petition at the High Court in Mombasa that in August last year, the taxman published on its portal new CRSP (Current Retail Selling Price) values which became effective from September.

Calculation of import duty to be paid for every used car model is usually based on CRSP, which is then adjusted for depreciation at the rate of 10 per cent per year.

However, the lobby argues that on January 30 this year, the taxman published new CRSP which was to be effective from February 5 for every model of used motor vehicles imported into the country.

The dealers are seeking declarations among them that KRA has violated the Constitution in relation to computations of the tax formula on imported vehicles.

They further claim that although some values in the ‘new’ CRSP are similar to the values published last year, most of the values for used motor vehicles have been increased by more than 50 per cent.

'No public participation'

“The respondents (KRA) did not invite any stakeholders in the car importation industry to make their proposals in the values arrived at in the determination of the CRSP values,” said the petitioner.

Through Gikandi and Company advocates, the importers say the values determined by KRA are oppressive and unreasonable as they cannot make any profit.

The lobby says its members have always paid a CRSP value of Sh14.4 million for imported used Toyota Land Cruiser V8 but that KRA has demanded Sh17.9 million for a similar vehicle being imported by one of its members.

“The CRSP values imposed by KRA pose a risk of closure of the car importation business and a loss of livelihood by car importers as the charges levied are unreasonably high,” the petition further states.

They further argue that there is a threat of violation of car importers' right to economic wellbeing and the right to earn a living due to unreasonable CRSP value imposed.

They say they have reached out to the taxman concerning the matter but that they got no response.

“Even though in the stakeholders' meetings KRA were directed to hold meetings with the association so as to resolve the CRSP issues, it has always been reluctant,” the petition further states.

The car dealers want the court to declare that the latest CRSP values that took effect on February 5 null and void for want of public involvement.

They also want a declaration that KRA may only alter the taxation formula after giving the public and stakeholders the right to participate in the decision making process.