Higher Taxes Hit Car Dealers Hard

About 438 vehicles are stuck at the port of Mombasa as their importers struggled to offset high duty charges imposed by the Kenya Revenue Authority (KRA).

And in what may deal a double blow to the importers, the taxman has threatened to auction the vehicles if the importers failed to clear them by May 15, just over two weeks from today.

The impounded vehicles include high-end brands such as Range Rover, Toyota Land Cruiser V8, Land Cruiser VX and BMW X5.

The taxman last month reviewed its valuation schedule — the Current Retail Selling Price (CRSP) formula — which saw the prices of many models of vehicles rise sharply, causing some dealers to abandon their cars at the port.

“Most of us clear the cars as we sell and when the clearance bills just shoot up suddenly, it makes no business sense to even try marketing the car since no one will buy,” an importer with vehicles stuck at the port of Kilindini said in an interview.

“It is only in Kenya where you buy a used car from Japan and then its clearance cost almost matches the buying price.”

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

Importers are also required to pay a registration fee, port charges and a Maritime Levy, all of which in most cases vary according to the vehicle configuration (left or right hand drive, the fuel it uses as well as its mode of transmission) (manual or automatic) or any other enhancements.