Economy

Crackdown nets 64 million shillings from illegal foreign cars


Used cars being unloaded from a freighter at the Port of Mombasa. FILE PHOTO | NMG

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Summary

  • Findings from several tax agencies show the value of seized motor vehicles jumped by 400,000 shillings in the previous quarter after President Uhuru Kenyatta ordered a crackdown on the illegal use of foreign license plates.
  • Kenya’s strict age limits for car imports and high import taxes have made shipping vehicles into the country expensive, creating a lucrative back market for cars destined for transshipment to regional neighbours.
  • The KRA has also recorded a higher number of interceptions of illegal cigarettes, mobile phones, clothing and petroleum products.

The Kenya Revenue Authority (KRA) seized cars worth 64.5 million shillings as part of a crackdown on vehicles bearing foreign license plates in the three months to March, bringing the value of the goods illegal assets confiscated during the period up to March at 570.7 million shillings.

Findings from several tax agencies show the value of seized motor vehicles jumped by 400,000 shillings in the previous quarter after President Uhuru Kenyatta ordered a crackdown on the illegal use of foreign license plates.

Kenya’s strict age limits for car imports and high import taxes have made shipping vehicles into the country expensive, creating a lucrative back market for cars destined for transshipment to regional neighbours.

The KRA has also recorded a higher number of interceptions of illegal cigarettes, mobile phones, clothing and petroleum products.

“The third quarter, which begins in January, got off to a good start following a crackdown on motorists illegally using vehicles with foreign license plates. The crackdown was carried out on January 12 and 13, 2022 in collaboration with d other agencies, which led to an increase in the number of seized motor vehicles,” the KRA said.

Kenya, which currently only allows vehicles up to eight years old to be imported, has the strictest regime on used car age limits in the region.

Tanzania allows imports of cars as old as 10 years old while Burundi, Rwanda and South Sudan, on the other hand, have no formal age limit for used cars.

It was only in 2018 that Uganda passed a law restricting the importation of vehicles manufactured more than 15 years previously.

The Uganda Revenue Authority (URA) announced on April 1, 2022 that effective July 1, 2022, there will be non-clearance of motor vehicles nine years old and older under the warehousing scheme.

Different age limits in the region have fueled tax and regulatory arbitrage to ship cheaper and older cars.

Many Kenyans are said to be involved in tax and regulatory arbitrage to ship cheaper and older cars.

Most used cars from Uganda, although cheaper, are much older than those in the Kenyan used car market due to Kampala’s looser age limit for its used vehicles imported.

This means that one can ship a much older car through Uganda, declare a low customs value and pay much lower taxes compared to importing directly into Kenya, where used cars older than over eight years old cannot enter.

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