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Post Reply: High Court Halts Kenya Revenue Authority's New Tax on Used Car Imports Over Public Participation Concerns

<blockquote><div class="quotetitle">Quote from <a class="profile-link highlight-moderator" href="https://lawguide.co.ke/understanding-law/legal-forum/profile/lawyer/">Lawyer</a> on July 1, 2025, 9:00 am</div><div id="pl-6728"  class="panel-layout" ><div id="pg-6728-0"  class="panel-grid panel-no-style" ><div id="pgc-6728-0-0"  class="panel-grid-cell"  data-weight="1" ><div id="panel-6728-0-0-0" class="so-panel widget widget_sow-editor panel-first-child panel-last-child" data-index="0" data-style="{&quot;background_image_attachment&quot;:false,&quot;background_display&quot;:&quot;tile&quot;,&quot;background_image_size&quot;:&quot;full&quot;,&quot;background_image_opacity&quot;:&quot;100&quot;,&quot;border_thickness&quot;:&quot;1px&quot;}" ><div
			
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	<p dir="ltr" data-pm-slice="1 1 []">the High Court in Kisumu has temporarily suspended the Kenya Revenue Authority's (KRA) implementation of a revised Current Retail Selling Price (CRSP) schedule for imported used motor vehicles, which was set to take effect on July 1, 2025. The decision, delivered by Justice Joe Omido, grants interim orders halting the rollout of the new tax formula until a legal challenge is fully heard and determined. The ruling comes as a relief to car importers and buyers who feared significant price hikes and economic disruptions due to the proposed changes.</p>
<p dir="ltr">The legal challenge was initiated by Faith Akinyi, a Kenyan citizen who argued that the KRA's updated CRSP schedule was introduced without adequate public participation, violating constitutional mandates under Articles 10 and 201, which emphasize inclusive engagement in legislative and public finance processes. The petitioner also contended that the new CRSP schedule contained critical flaws, including the omission of several vehicle models, erroneous matching of car models with incorrect features such as fuel types and chassis numbers, and inconsistent valuations for identical car models. These errors, according to court documents, undermine the reliability of the CRSP as a tax base and could lead to unfair tax assessments.</p>
<p dir="ltr">The KRA announced the revised CRSP schedule on May 30, 2025, stating that it would be used to determine the customs value of used motor vehicles imported into Kenya. The schedule, outlined in a circular dated May 22, 2025, titled "Forwarding of the Updated CRSP List," was intended to reflect economic shifts since the last update in 2019, including new vehicle models, exchange rate fluctuations, and changes in tax rates. The authority claimed that the revisions followed extensive stakeholder consultations, with feedback shaping the final schedule. However, petitioners, including the Car Importers Association of Kenya (CIAK), disputed this, arguing that the engagement was superficial and excluded critical sectors of the public.</p>
<p dir="ltr">The court's interim orders specifically suspend the May 22 circular and a related public notice published on the KRA's website on May 30, 2025. The suspension will remain in effect until July 17, 2025, when the case is scheduled for further mention to determine the next steps. Justice Omido directed that all relevant documents be served on the respondents, including the KRA, the Commissioner for Customs and Border Control, and other named officials, to ensure a fair hearing.</p>
<p dir="ltr">The controversy surrounding the CRSP schedule is not new. In 2019, a similar challenge led to a court ruling that declared the KRA's valuation guide unconstitutional due to insufficient public participation. That case highlighted significant discrepancies, such as the KRA listing a new Subaru Forester at 6.39 million Kenyan Shillings, while its actual showroom price was 4.38 million Kenyan Shillings, resulting in an additional tax burden of over 1 million Kenyan Shillings for importers. The current petition echoes these concerns, alleging that the KRA has failed to comply with previous court orders and constitutional requirements.</p>
<p dir="ltr">The Car Importers Association of Kenya has been vocal in its opposition to the new tax formula, warning that it could increase the cost of some used vehicles by up to 145 percent. Popular models such as the Toyota Passo, now valued at 2.6 million Kenyan Shillings (an 87 percent increase), the Nissan Vanette at 4.6 million Kenyan Shillings (a 100 percent increase), and the Toyota Probox at over 3.3 million Kenyan Shillings (a 91 percent increase) are among those affected. The association argues that these price hikes disproportionately burden low and middle-income earners who rely on affordable, fuel-efficient vehicles like the Toyota Vitz, Mazda Demio, and Suzuki Swift for personal and commercial use.</p>
<p dir="ltr">CIAK Chairman Peter Otieno, represented by lawyer Ngibuini Gikandi, told the court that the new tax formula discriminates against smaller, economical cars while larger, more expensive models like the Volkswagen and Lexus LX570 face reduced tax obligations. This disparity, he argued, undermines economic fairness and social equity, making mobility and economic participation increasingly exclusive to wealthier Kenyans. The association also criticized the KRA for ignoring its proposed depreciation formula, which allowed up to 85 percent depreciation for vehicles older than seven years, a measure that could have mitigated the tax burden.</p>
<p dir="ltr">The petitioners further highlighted the lack of transparency in the KRA's consultation process. Faith Akinyi, through her lawyer Jackson Awele, stated that she only learned of the new CRSP schedule after the May 22 circular was issued, indicating a lack of broad public engagement. The omission of several vehicle models from the CRSP list raises concerns about arbitrary valuations by customs officers, potentially leading to inconsistent and inflated tax assessments at ports of entry. This, the petitioners argue, could stifle fair competition in the motor vehicle industry, favoring new car dealers over used car importers and consumers.</p>
<p dir="ltr">The economic implications of the new CRSP schedule are significant, given that the majority of vehicles in Kenya are imported second-hand units, primarily from markets like Japan, the UK, and South Africa. The current tax structure includes an import duty of 35 percent, an excise duty ranging from 25 to 35 percent based on engine size, and a value-added tax of 16 percent. Even slight inflations in the CRSP base value can substantially increase the overall tax burden, impacting retail prices and the affordability of vehicles for ordinary Kenyans.</p>
<p dir="ltr">The High Court's ruling has sparked widespread discussion on social media, with posts reflecting relief among car buyers and importers. The decision is seen as a temporary reprieve, but the broader debate over fair taxation and public participation in policy-making continues. The KRA has been directed to respond to the legal challenge within seven days, and all eyes are now on the upcoming court proceedings to determine whether the revised CRSP schedule will be permanently blocked or implemented with modifications.</p>
<p dir="ltr">As Kenya grapples with a projected revenue shortfall of 253 billion Kenyan Shillings, according to the National Treasury, the outcome of this case could have far-reaching implications for the automotive industry, tax policy, and public trust in governance. For now, car importers and buyers await further clarity, hopeful that the court's intervention will lead to a more equitable and transparent tax framework.</p>
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