The move by the Kenya Revenue Authority (KRA) to charge exorbitant duty has seen importers leave their cars at the port of Mombasa as they struggled to offset the fees.
About 438 vehicles are currently stuck at the port as the taxman threatens to auction them.
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 revealed.
“It is only in Kenya where you buy a used car from Japan and then its clearance cost almost matches the buying price.”
Depreciation
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.
The CRSP captures the estimated price of a brand new version of a vehicle an importer purchases.
The KRA then relies on the estimated price to calculate the various duties and levies charged on imported units.
The levies include import duty, excise tax, Value Added Tax, import licence (IDF) and Railway Development Levy.
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.
The KRA makes annual reviews of its valuation benchmarks, both for motor vehicles and motor cycles.
This depends on the trend of importation in order to take advantage of the favourite makes and models to maximise tax collection.
Profit margin
For duty calculations, KRA customs uses the CRSP, removes the profit margin and depreciate it at a certain rate (also revised yearly) and deduct the percentage taxes to get the about upon which the customs value will be based.
In the latest review which effects on March 25, the taxman seemingly targeted the small engine capacity cars currently being favoured by mobile app taxi hailing services including the Honda Fit whose CRSP was set at Sh3.3 million for the 1500cc-2-wheel drive petrol model.
A Land Cruiser VX with an engine capacity of 3000cc and running on diesel was valued at Sh11.6 million while a 1500 cc Mazda Demio was priced at Sh1.6 million.
The values are then used to calculate the duty payable for the cars.
Apart from the vehicles, the KRA has netted 29 motorcycles which are mainly held at its offices in Kisumu.
Other items impounded for auction by the taxman include consignments of cooking oil, molasses, gas cylinders, car parts and used clothing in tens of 40-foot containers.
The KRA is also holding on several personal effects like spectacles, books, shoes and packages of clothing which it seized at the Jomo Kenyatta International Airport(JKIA).
Insiders revealed that the items belonged to returning citizens.
“Since the heightened crackdown on illicit imports last year, it has been very difficult to get exemptions for these items so their owners just decide to abandon them.
“It is also hard to coordinate them since they consolidate several items in one container and when approval fails no one especially ant to pursue the matter, “a custom warehouse official based in Mombasa said.
