Tax Inflation Policy Leads To a Tremendous Dip in Luxury Car Sales

The Kenya Revenue Authority has recorded an unprecedented low in the purchase of luxury, high-end cars in 2019 following its informed decision to increase the exercise duty of the super spins from 20 percent in 2018 to 30 percent in 2019.

This Robinhood approach which was meant to increase the tax limit of the elite has proved to be a failed move given that the intention of this policy was to boost revenues yielded from this high-end purchases but as of June 2019, a measly Ksh. 91 million had been generated from these sales vis a vis the previous years where the average was somewhere between Ksh. 150 million to Ksh. 250 million on the same.

A majority of the sales decline is also attributed to the government’s efforts on curbing corruption given the recent lifestyle vetting that the government has been conducting to ascertain that the country’s elite are living well within their means in accordance to their income.

This policy which targeted vehicles with an engine capacity of beyond 2500cc that was implemented on September in the advent of the Finance Management Act of 2018 , was meant to discourage the importation of foreign vehicles correspondingly encouraging the purchasing and appreciation of locally assembled cars, the like that are made by companies such as Mobius Kenya.

This policy meant that the extra costs would be passed on to the buyers by the sellers. Informed data as of June shows that the purchase of these luxury cars has declined by close to 50 percent in the six months. Recognized car brands such as BMW and Mercedes Benz recorded a decline in car sales in Kenya from 140 in 2018 to 70 units in 2019 with some brands, such as BMW and Porsche which failed to make even a single car sale for the first two months of 2019.

The iconic Land Rover model, which includes Range Rover and its many variants only managed to sell 8 cars, which is a drastic drop from the 14 units they sold last year around the same time. Jaguar managed to sell just one unit in the first two months and one Jeep Grand SUV was sold through DT Dobie down from the two that were sold last year.

High-end Toyota brands also recorded a decline in their sales within the first two months of the year, from a confident 403 to a weak and unsatisfactory 349. Mitsubishi brands also fell to a less than confident 292 units from 306 units sold last year while Nissan saw their units drop from 108 to 49 according to statistical data provided by the Kenya Motor Industry Association (KMIA).

Mercedes, however, seemed to be one of the few car brands that actually realized a bloom in their car sales after they sold 49 units through DT Dobie up from 32 units in the first two month period of both years.

With the new policy, erudite sources confirm that the sale of a car that would ordinarily go for Ksh.1 million would attract an additional Ksh. 241,000 in related taxes. Authority experts have declared that they were oblivious that this policy would have such drastic impacts.



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