Car importers sue KRA over new tax formula, warn of 145 per cent price hike on used vehicles
CIAK argues that the revised tax structure could raise the cost of some used vehicles by as much as 145 per cent, unfairly burdening ordinary Kenyans.
The Car Importers Association of Kenya (CIAK) has moved to court to challenge the Kenya Revenue Authority’s new tax formula for used vehicles, warning that the changes will cause steep price increases and disproportionately burden low-income buyers.
The association has filed a petition in the High Court in Mombasa, seeking to halt the implementation of the new tax formula scheduled to take effect on July 1.
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CIAK argues that the revised taxation structure will increase the prices of some used vehicles by up to 145 per cent, placing an unfair burden on ordinary Kenyans.
Justice Jairus Ngaah certified the application as urgent and directed that the Kenya Revenue Authority be served with the case documents immediately and respond within seven days.
CIAK chairman Peter Otieno, represented by lawyer Ngibuini Gikandi, told the court that the new formula is discriminatory as it targets affordable, fuel-efficient models commonly used by low and middle-income earners.
“This formula unfairly targets low and middle-income earners by increasing taxes on vehicles that are affordable and economical,” Otieno said.
He said the revised tax rule significantly raises levies on small cars such as the Toyota Vitz, Mazda Demio and Suzuki Swift, which are widely used for both private and commercial transport across the country.
Luxury vehicles
By contrast, Otieno noted that luxury vehicles such as the Lexus LX570 and certain Volkswagen models will enjoy reduced tax rates under the same framework, effectively creating a regressive tax regime.
“This amounts to reverse progressivity in taxation, where the wealthy are rewarded and the struggling majority are penalised,” he said.
CIAK further claimed that the new formula, anchored on changes to the current retail selling price (CRSP), was introduced without any form of public participation, contrary to the Constitution.
“There was no stakeholder engagement or public participation, yet the impact of this policy will be widespread and severe,” Otieno said.
The legal challenge comes amid growing concern among importers and car buyers over the rising cost of vehicles, and could potentially delay or block the implementation of the controversial KRA tax changes.
Popular car models
Fresh valuations released under the new pricing formula show steep hikes in popular car models.
The Toyota Passo 990cc now carries a value of Sh2.6 million, an 87 per cent increase from its previous price.
The Nissan Vanette has doubled to Sh4.6 million, while the Toyota Probox has shot up 91 per cent to over Sh3.3 million.
CIAK also flagged the inclusion of newer, high-end models such as the Aiways U6 electric SUV, now valued at Sh8.2 million, and the Audi 3.0 TFSI Quattro S Line, listed at more than Sh16.2 million.
“These prices are out of touch with our market. Even second-hand versions will attract duties most dealers and customers can’t afford,” Otieno said.
Importers also raised concerns over the exclusion of popular models like the Toyota Hilux and Subaru Impreza G4 from the pricing list, saying the omissions have created confusion and uncertainty in the industry.
The association accused KRA of misleading the public over consultations, saying: “You denied the leaked list was yours, but now you’ve published it exactly as it was. So why pretend to engage?”
CIAK further criticised KRA for disregarding its proposed depreciation formula, which allowed up to 85 per cent depreciation on vehicles older than seven years—a system they say would have made taxes more manageable.
They warned that the sharp rise in vehicle valuations and the associated duties could lead to a 70 per cent drop in inventory for small and medium importers, with knock-on effects including job losses in clearing yards, garages, and showrooms.
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