Nairobi — The government has removed a proposal to cap taxes on registered motor vehicles at Sh100,000, meaning that those owning high-end or expensive cars will have to pay more if Finance Bill 2024 passes.

Under the new system, vehicle owners will now be taxed based on the current market value of their vehicles.

The minimum annual tax payable will be Sh5,000, ensuring that even lower-valued vehicles contribute to the nation's revenue, according to Treasury Cabinet Secretary Njuguna Ndung'u.

Such a move could also have a negative impact on the country's car market, as buyers may shun buying vehicles to avoid the tax.

"To expand the tax base and make our country self-reliant, I propose to introduce an annual motor vehicle tax at the rate of 2.5% of the value of the vehicle subject to minimum amount of Ksh 5,000 per annum," he said.

Ndung'u said the new changes are expected to generate substantial additional income for the government, helping to fund critical infrastructure projects and public services.

This is a departure from the government's earlier proposal under the proposal contained in the Finance Bill 2024, which set out revenue-raising measures for the 2024-25 finance year.

It stipulated that the underwriter would have five working days to remit the tax.

Failure to remit the tax on time will attract a 50 percent penalty calculated on the unremitted tax in addition to the actual amount.

The law will exempt ambulances and government-owned vehicles from the motor vehicle circulation tax under the Privileges and Immunities Act.