Ugandan traders have emerged as top beneficiaries of the new tax regime that raised prices of second hand cars imported in Kenya.
Kenyan car dealers are crying foul over the influx of cheaper vehicles, either diverted from Uganda-bound cargo or rerouted once cleared in the landlocked country.
Last month, Kenya Revenue Authority (KRA) officials were forced to launch a crackdown on vehicles bearing Uganda number plates in Western Kenya following widespread complaints by local traders.
New Kenyan taxes, which came into force last December following the amendment of the excise duty law, have increased the prices of smaller motor vehicles while cutting cost of the luxury ones by up to Sh1.27 million.
Importer are required to pay Ksh200,000 ($1,960) for vehicles aged more than three years and a lesser fee of Sh150,000 ($1,470) for newer cars, a change from the previous 20 per cent duty charged on a vehicle’s value.
Those looking to buy popular budget car models valued at below Ksh1 million ($9,800) have been hit hardest following a near doubling of the excise duty with the amendment of the law.
Uganda, which shares a custom territory with Kenya – and orders its second hand vehicles through the port of Mombasa – does not apply the same tax rules making its imports cheaper.
The Kenya Auto Bazaar Association, a lobby group for car importers, says many buyers have opted to acquire cars imported by Ugandans to avoid high taxes imposed on second hand vehicles in Kenya.
The association’s secretary- general, Charles Munyori, said a cartel has been sneaking in vehicles through the Malaba-Busia border without paying excise duty.
Mr Munyori wants the border customs officers arrested for allowing untaxed foreign vehicles into the country.
“People have realised that through corruption, it’s cheaper to buy and operate a Ugandan vehicle in the country. This is hurting the business of locals who dutifully pay their tax,” Mr Munyori said.
“And the local dealers have questioned why the foreign vehicles are being allowed to freely operate in the country despite having crossed over illegally.”
The association has asked KRA, the National Transport and Safety Authority (NTSA), Kenya Police and other enforcement bodies to crack the whip on officers involved and to tighten inspection at the borders.
“We have written to bosses of relevant agencies alerting them of the alarming increase of cheap Ugandan vehicles, especially in Western Kenya. Our members are recording low sales and losses due to the issue,” said Mr Munyori.
He said traders were also using falsified documents to exploit the temporary importation for a maximum of three months that is allowed for foreigners and Kenyans working in other countries.
A police officer who did not want to be named said the cartels provide falsified documents for temporary importation and other payment vouchers at low prices, which entice the public.
“There is a proliferation of illegally imported vehicles. We held over 30 vehicles in a crackdown on December 23 in Western Kenya. Some are over 20- years -old whereas the limit according to law is eight years,” said the officer.
Michael Owuor, whose vehicle was impounded by custom officials on December 23, said the increased excise duty was to blame for the influx of Ugandan vehicles.
“Given an opportunity to choose between a Ugandan and Kenyan vehicle of the same make, you will go for the cheaper one. Ugandans sell fairly good vehicles at the price of a motorbike locally,” said Mr Owuor.