The Kenya Revenue Authority (KRA) has revealed that it only consults registered car dealers, and not second hand importers before preparing the formula used in valuation of used motor vehicles as they enter Kenya.
The taxman made the disclosure in court in a case where second-hand motor vehicle importers have sued KRA over use of the Current Retail Selling Price (CRSP) as a guideline to calculate import duty payable on used cars.
Victor Mungai, a supervisor at KRA’s valuation section, told the court that CRSP is prepared after they get vehicle prices from car dealers.
“We usually write a letter to them (car dealers) so that they give us retail prices of the vehicles, the CRSP contains the make of the car, model, engine and seats,” Mr Mungai said.
Car dealers operating locally such as Toyota Kenya, Isuzu East Africa and Simba Colt Motors usually sell new motor vehicles, which are priced higher than second hand cars which form the bulk of imports.
Mr Mungai was testifying before Justice Eric Ogola during the hearing of a petition by the Car Importers Association of Kenya (CIAK) challenging the method used to calculate import duty payable on used vehicles.
The association claims that on January 30 last year, KRA published “new” CRSP which was to be effective February 5 2018 for every model of used motor vehicles being imported into the country.
The petitioner also states that its members have always paid a CRSP value of Sh14.4 million for imported used Toyota Land Cruiser V8 but that KRA has demanded Sh17.9 million for a similar vehicle.
According to the association, the taxman may alter CRSP values on its website or public portal published in September 2017 only after complying with the law regarding public participation.
Upon cross examination by lawyer Gikandi Ngibuni for the association on the issue of public participation, Mr Mungai said KRA did not hold any meeting with CIAK to discuss the new formula.
“Discussions with car importers association cannot change the value of the CRSP’s,” said Mr Mungai.
Through an affidavit of its chief manager Joseph Legei, KRA says customs value of imported used motor vehicles based on the actual price paid for when sold for export is not ideal.KRA argues that it has always obtained CRSP from local dealers and shared it with car importers prior to publishing and implementing.
The association is seeking declarations among them that KRA has violated the Constitution in relation to computations of CRSP values.
It is also seeking a declaration that the CRSP values of used imported motor vehicles published by KRA which took effect on February 5 last year are null and void for want of public involvement.