Relief for car importers as court rules tax plan illegal

 Second hand car dealers in the country have a reason to smile after a court in Mombasa declared the current tax computation formula used by Kenya Revenue Authority (KRA) unconstitutional.

High Court Judge Eric Ogola ruled  as unconstitutional the Current Retail Selling Price (CRSP) values of used imported second hand vehicles  because the taxman failed to consult key stakeholders  when coming up with the formula. KRA on February 5, 2018 published on its online portal, new tax computation formula, without involving key players, a move that prompted the stakeholders in the sector led by the Car Importers Association of Kenya (CIAK) to move to court seeking to overturn the import duties formula.

“A declaration hereby issues that the current retail selling price values of the used imported vehicles published in KRA website/portal which took effect on Februaury 5, 2019 were arrived at without public participation and violates Article 10 and 47 of the Constitution and,” the judge said.

In the ruling, however, transactions done within the old tax process will not be reversed. The judge added that the current motor vehicle tax process promotes bias, unfairness and discrimination in assessment of tax due.

“A declaration that for purpose of continuity and in the interest of the public the transactions already affected via the said CRSP shall continue to apply until such a time as the respondents will establish a new CRSP value in accordance with the law within 12 months from the date of this judgment,” he ruled.

CIAK national chairman Peter Otieno welcomed the ruling saying the association was awaiting to engage KRA on new and fair market rates which must go through public participation. “It was a fair ruling for us. We welcome it because it will ensure a new formula that we will be part of. The formula KRA has been using is illegal and unconstitutional,” said Otieno during  an interview with People Daily. Second-hand vehicles dealers had argued that the prices supplied by new vehicle sellers to KRA are sometimes higher than actual showroom prices therefore affecting market flow.