KRA expects $3.4m annually from PSV tax

Monday January 22 2007

By FRANCIS AYIEKO
Special Correspondent

The Kenya government expects to collect at least Ksh240 million ($3.4 million) annually from a new tax to be levied on drivers and conductors of public service vehicles popularly known as matatus.

The Kenya Revenue Authority (KRA) started collecting the tax, to be paid in advance, in the first week of January after it came into force on January 1.

But while declaring its support for the new tax, the Matatu Welfare Association — the umbrella body of matatu drivers and conductors — asked the KRA to review the drivers’ tax rates downwards to reflect the “irregular” flow of their income.

The tax was introduced last year by Finance Minister Amos Kimunya through the Finance Act 2006. It followed the amendment of Section 12a of the Income Tax Act Cap 470 to allow the imposition of advance tax on PSV drivers and conductors.

The new tax targets at least 50,000 drivers and 50,000 conductors who are estimated to be working in Kenya’s public transport sub-sector.

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According to the Matatu Welfare Association, the country has over 50,000 public service vehicles.

Each driver will pay Ksh3,600 ($51.4) in tax annually, while a conductor will be required to pay Ksh1,200 ($17).

It will be difficult for them to evade the tax since those who fail to comply will not have their PSV licences renewed.

After the reforms introduced in the public transport sub-sector in 2003 by then transport minister John Michuki, each PSV is now operated by a driver and only one conductor.

The advance tax was first introduced in 1995 but targeted only owners of commercial vehicles. Vans, pick-ups and lorries are charged Ksh1,500 ($21.4) per tonne of load capacity per annum or Ksh2,400 ($34.3), whichever is higher.

On the other hand, owners of saloons, station wagons, mini-buses and coaches pay Ksh60 (US cents 86) per month per passenger seat or Ksh2,400 ($34.3) per year, whichever is higher.

An official at the headquarters in Nairobi, told The EastAfrican that scores of drivers and conductors had by early January paid the tax in full.

“We are happy that they are complying; many of them started paying as early as December last year,” said the source.

The Matatu Welfare Association said it supports the introduction of the tax but asked the tax authority not squeeze its members “too hard.”

Association chairman Dickson Mbugua asked the revenue body to consider reducing the Ksh3,600 ($51.4) it levies on drivers, arguing that saw few of them work for the whole year, a fact that making their earnings “unpredictable.”

“The Ksh3,600 may be a bit too high for the drivers considering that most of them sometimes go for months without working,” said Mr Mbugua, whose association represents about 40,000 matatu owners.

Most matatu crew (drivers and conductors) in Kenya are paid wages on a daily basis. The amount they earn is determined by the day’s collection as agreed upon with the vehicle owner.

Furthermore, the arrangement between vehicle owners and the crew is often so loose that there is never any guarantee of its lasting a year.

This is contrary to the traffic rules introduced by Mr Michuki, that require all public service vehicle drivers and conductors to be put on salary.

However, the revenue authority insists that predictability of one’s income is never a consideration when determining who should pay taxes.

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