Car Importers Association of Kenya (Ciak) has sued Kenya Revenue Authority (KRA) over the agency’s new motor vehicle price list that will form the basis for collecting taxes on used models arriving in Kenya from July 1.
The taxman recently updated the Current Retail Selling Price (CRSP) which forms the basis for levying six taxes including excise and import duty after depreciation.
The new CRSP shows that total taxes on most vehicles including Suzuki Swift, Mazda Demio and Toyota Vitz will rise substantially, with some more than doubling. Ciak has alleged that KRA ignored public participation and acted unilaterally when publishing the new CRSP.
In its petition filed at the High Court in Mombasa on June 20, Ciak wants a declaration that KRA’s publication and intended implementation of the new CRSP values for used motor vehicles scheduled to take effect on July 1, without conducting meaningful public participation violates the constitution and Fair Administrative Action Act.
Through lawyer Gikandi Ngibuini, Ciak says KRA’s unilateral decision to implement the revised CRSP values without subjecting the process to meaningful public participation has triggered a disproportionate and punitive escalation in customs values for several motor vehicle models.
“The implementation of the new CRSP values in its current form serves to entrench social and economic inequality by making essential tools of mobility and economic participation the exclusive preserve of the wealthy elite,” argue the petitioner.
Justice Jairus Ngaah directed the case to be mentioned on June 30 for directions on the disposal of an application for conservatory orders. KRA is yet to respond in the matter.
Ciak which is made up of 75 members says that despite far reaching impact of CRSP on motor vehicles importers and citizens, KRA failed to ensure an inclusive, transparent and fair engagement with all stakeholders.
“Had KRA conducted the process in compliance with the Constitution and relevant statutory frameworks governing public participation, the current crisis of inflated values, unrepresented models and stakeholder discontent could have been avoided,” Ciak argues.
According to Ciak, the manner and form of the publication replicate deficiencies that were previously condemned by the High Court in 2019, where the court ordered KRA to formulate and publish a new CRSP schedule in compliance with the law and ensure that the process included meaningful public participation.
Ciak says implementation of CRSP values effective July 1, without complying with the law and court orders, is not only illegal but oppressive to importers and consumers who bear the brunt of arbitrary increase in customs values and resultant taxes.
“This raises a fundamental question as to how KRA intends to determine the customs value of those vehicles that have not been listed in the new CRSP,” part of the petition states.
Ciak says that the omission of significant portion of vehicle models leaves a wide and dangerous discretion in the hands of customs officers opening the door for arbitrary valuation and manipulation of assessment at the ports of entry.
“This not only exposes vehicle importers to uncertainty and unpredictability in taxation but also creates a fertile breeding ground for corruption,” argue Ciak.
The petitioner says that the new CRSP schedule benefits new vehicle dealers and other assemblers while marginalising independent importers of used units. .
Ciak told the court that new vehicle dealers are its direct competitors.
The association further argue that the new CRSP schedule disproportionately penalises hybrid and other low emission vehicles by deeming their customs values and liabilities higher than fuel-guzzling petrol models.
“Stakeholders were never given the opportunity to challenge or explain these regressive valuations due to lack of participation in the CRSP development,” the petition states.
Ciak is also seeking a declaration that KRA’s failure to consult it and other stakeholders and the taxman’s subsequent unilateral publication of the new CRSP values contravenes the principles of good governance, accountability, transparency and public participation.
It also wants an order issued directing KRA to apply the World Trade Organisation customs valuation methods provided under the Fourth Schedule of the WTO Agreement as read together with the East African Community Customs Management Act.
Ciak has also named Commissioner for Customs & Border Control, Chief Manager Value and Tariff Customs Service Department and Ms Tabitha Mwangi who is the Chief Manager Business Intelligence and Analysis Customs and Border Control Department as respondents in the case.
