Double taxation for motorists as road toll looms on key highways
What you need to know:
KeNHA has erected billboards on key roads, notifying motorists of the intention to introduce user fees commonly known as tolls – to boost the pool of cash it is currently collecting through fuel levy.
The new charges are curiously being introduced under a public-private partnership (PPP) despite the fact that the roads have been public funded using tax revenues.
The government last year appointed transaction advisers to determine the feasibility of the plan, its cost and the anticipated charges for motorists, including when the private operators should expect to recoup their money.
Kenyan motorists are headed for tough times as the government prepares to introduce a new tax on four major roads to raise extra cash for road maintenance.
The Kenya National Highways Authority (KeNHA) has erected billboards on key roads, notifying motorists of the intention to introduce user fees commonly known as tolls – to boost the pool of cash it is currently collecting through fuel levy.
The list of highways, where motorists may soon start paying includes Nairobi-Nakuru, Nairobi-Mombasa, Thika Superhighway and Nairobi’s Southern by-pass.
The new charges, which amount to a new layer of taxation, are curiously being introduced under a public-private partnership (PPP) despite the fact that the roads have been public funded using tax revenues.
Policy analysts said introducing toll charges on roads built using public funds merely amounted to hiring an agent to charge maintenance tax.
“In the case where the person collecting the toll has not invested in the project, they are merely acting as an agent for government,” said Kwame Owino, the chief executive of the Institute of Economic Affairs.
“In so far as the double taxation debate is concerned, if the toll fee is meant to maintain our roads, then why should we be charged another road maintenance levy?” he posed.
Tolling of roads also raises weighty human rights, equity and fairness issues. It has been successfully argued in many jurisdictions that introducing tolls on major roads without providing viable toll-free alternatives amounts to a breach of citizens’ right to free movement while choosing to charge tolls on particular roads while leaving others free amounts to discrimination of citizens based merely on where they live.
The additional taxation amounts to an extra burden on citizens who have absorbed at least eight major increases in levies in the past two and a half years as the government looks to fund its multi-trillion shilling annual budgets.
KeNHA declined to respond to questions on the proposed charges, arguing that it has not finalised the plan and it would therefore be “premature” to discuss its launch and how it would work.
“I cannot share with you the details since we have not agreed on how many stations we will have and how much to charge. We are still finalising the feasibility study,” said Peter Mundinia, the authority’s director-general.
“Naturally, it will be an electronic tolling system where users pay through a digital platform.”
The government last year appointed transaction advisers to determine the feasibility of the plan, its cost and the anticipated charges for motorists, including when the private operators should expect to recoup their money.
Previous disclosures indicate that the Mombasa-Nairobi highway is meant to have five toll stations including (at Mariakani and the Machakos turn-off), while Rironi, Naivasha and Lanet will host three on Nairobi-Nakuru road.
When tolling was first mooted three years ago, the proposed charges were set at Sh1.20 per kilometre for passenger cars and Sh1.79 for pick-ups and matatus. Buses were to part with Sh2.39 per kilometre, medium trucks Sh2.39 and large trucks Sh3.59.
Roads tolls were initially introduced in Kenya in the late 1980s, but were scrapped in the mid-1990s in favour of the Roads Maintenance Levy to eliminate rampant corruption at the toll stations.
The fee was in July increased by 33 per cent to Sh12 per litre of fuel consumed, forcing commuters to dig deeper into the pockets for the same amount of fuel.
In the year to June 2015, the Kenya Roads Board is estimated to have collected Sh25.3 billion, a kitty which is expected to grow even bigger with the introduction of tolls on the four highways.
The Consumer Federation of Kenya opposed the move, terming the upcoming toll charges as “double taxation”, adding that while tolling has its advantages, one of the levies has to be dropped.
“Our position is that the government should either elect to toll the roads or charge a road maintenance fee with the fuels,” said secretary-general Stephen Mutoro.
“Implementing both simultaneously amounts to double taxation which we shall oppose.’’
Besides the current plan, the Kenya Roads Bill, 2015, which is before Parliament, is also planning to introduce fees for use of highways and county roads based on distance travelled and vehicle weight.
Road tolling was conceptualised in the developed world as a form of taxation through which governments could recoup the cost of road construction and maintenance given the huge growth in the number of motor vehicles.
The system allows a private entity that has built a road to charge a fee – better known as tolls – to recoup their investment and hand over the highway to the State.
Where taxpayers have funded construction (or are paying for the loans borrowed to do so), the involvement of a private entity can only be to collect the fee on behalf of the State at a predetermined service fee.
The roads KeNHA is proposing to toll have all been built using public funds.
Thika Road, a 50-kilometre highway completed in 2012, for instance, cost Sh31 billion from the AfDB and the Kenyan government.
South Africa recently introduced electronic tolls on highways around Pretoria and Johannesburg, to help its roads agency (Sanral) upgrade 201km of roads at a cost of Sh126 billion.
The new charges, which only exempted minibus taxis and commuter buses, prompted violent protests, which only cooled off after the rates were revised downwards mid last year.
In the United Kingdom, tolling of roads was all but abandoned in the 1960s leaving just a few privately-built roads and bridges with the charge.
Only one major highway in Britain – the M6 in Birmingham – charges toll, while cities such as London and Stockholm levy a “congestion price”, if one ventures into certain areas.
In America, about 35 states had at least one tolled highway, bridge or tunnel as of 2014, which yielded collection of approximately $13 billion the previous year, according to the International Bridge Tunnel and Turnpike Association.
New Zealand levies a road user charge, but this is only for vehicles that do not pay a fuel levy. All vehicles that use petrol and those that use diesel but weigh less than 3,500 kilogrammes pay a fuel levy.
The move to introduce tolling comes at a time when Kenya’s pump prices have remained immune to a global dip in prices while the government is planning to introduce a 16 per cent VAT on petroleum products in September.