How KRA Is Losing Revenues To Uganda Over Exorbitant Taxes On Imported Vehicles
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Tax Fraud
posted by : Admin DOQ : 2020-03-14 14:27:23
If you import a car today in Kenya, you are likely to pay an amount equal to the purchase price or more as taxes to the Kenya Revenue Authority (KRA), thanks to the exorbitant tax regime.
For instance, if the purchase price of a car is Ksh5 million, you will need at least Ksh5 million to clear the vehicle at the port, making it an expensive affair to own a car in the country.
In one instance, the ownerof Ndovu Cement imported a brand new Lamborghini Urus into the country at a cost of Ksh26 million. For clearance and registration in the country, KRA asked for the same amount of money, making it hard for the owner to register the vehicle in the country.
The owner found it ridiculous and decided to register the vehicle in Uganda. This means that the car will drive in Kenya, with Ugandan plates.
This is just one example of cars with Ugandan registration number plates but being driven in Kenya.
In the recent past, the number of luxurious cars with fake number plates have increased, pointing out to widespread fraud where people evade taxes.
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“This scenario is replicated in many other cars, Audi duty last year was around Ksh600,000 for a base model 2,000cc Audi A4 and we did ship in a lot of them, So what did KRA do? They decided to hike the taxes on them to over Ksh800,000. So at the moment no one is bringing them in,which means again they will make less money on Audis than they did last year,” says a luxury car dealer, Imports by Kairo, vowing to stop importing Audi cars.
The import duty is calculated using the registration age.
According to the Excise Duty Act of 2015 is, an import duty of Ksh150,000 is levied for a car less than 3 years old while Ksh200,000 for a car more than 3 years old.
On top of it, a value added tax (VAT) of 16 percent is charged to the buyer. Also an Import Declaration Fee (IDF) of 25 percent of the cost, insurance, and freight (CIF) value of the car is also charged.
The government also introduced Railways Development Levy to help the government finance the rail network’s upgrade. It has been set at 1.5 percent of imported goods, meant to fund for the construction of a new railway line from the Port of Mombasa to Uganda.
A Maritime Surcharge Levy (MSS Levy) is also charged to all shippers when items are imported.
Clearing & Freight Forwarding Cost is paid to the freight forwarding company including dealing with the carriers, legalities and insurance.
A delivery order fee is paid for the release of goods by the shipping company. The custodian of the cargo must verify the delivery order and proof of completion of the customs clearance procedures. Only then will the cargo be released to the importer. The delivery order fee is the cost of verifying the delivery order and having your automobile released.
With all these expenses, some people opt to register their cars in Uganda where it is cheaper and later change the number plates to Kenyan registration numbers.
However, in some incidences, luxurious cars are smuggled in and given fake registration details.
