Used car dealers in Kenya have breathed a sigh of relief as the High Court in Mombasa suspended the Kenya Revenue Authority (KRA) bid to raises taxes on used cars.
KRA had issued a new CRSP (Current Retail Selling Price) on 7th July 2020, which would have increased taxes for used car imports considerably. The CRSP is a list of prices for new vehicles, which makes the basis for which used imports are taxed based on a depreciation formula.
Upon the release of the new prices, the Car Importers Association of Kenya, which represents over 80 dealers, filed a petition in court to stop it. Among their reasons is that they were not consulted as required by the law and that the CRSP was grossly inflated.
The CRSP is fashioned after ‘showroom prices’ of brand-new models, which is then depreciated by 10% per year. Currently, Kenya only allows the importation of 8yr old vehicles. In making its argument in court, the Car Importers Association argued that KRA had given higher value for some models than was available for brand—new cars at the local dealerships.
For instance, as reported by the Business Daily, the new CRSP gives the Subaru Forrester a value of 6.39 million, while the same goes for 4.38 million locally.
In another example, the new CRSP failed in common sense by rating a small hatchback such as the Honda Fit at 3.8 million, but pricing the more luxurious Mercedes Benz B 180 at 3.1 million.
KRA has defended its actions by saying that it conducted public participation between April- May as required by law.
In delivering her judgment, Justice Mugure Thande suspended the new prices and ordered both parties to make submissions by 1st September. The case will be mentioned on 22nd September.
In the meantime, importers will continue using the older CRSP until the court determines the way forward.