Motorcycle dealers hit by Sh10,000 new excise levy

Players in the motor vehicle industry have decried the introduction of Sh10,000 excise tax on bikes, saying this would hurt the business that has witnessed significant growth in the last decade.

Dealers in the motorcycle taxis, commonly referred to as boda boda, argue that the proposal to slap motorcycles an excise tax of Sh10,000 per unit could be counter-productive to the industry.

“Without doubt, the prices of motorcycles will go up and so will the transport costs, affecting negatively a sector that is playing a very important part in Kenyan economy,” Car and General Managing Director Vijay Gidoomal, told The Standard.

Demand for the two wheelers has been steadily rising in the past five years after the Government removed taxes. But the introduction of VAT last year cut sales of new bikes by a half. And the latest round of taxes is expected to throw many dealers out of business.

Some of those expected to take a beating include, Yamaha Kenya, which is a unit of Toyota Kenya, Honda Motorcycle Kenya, Car & General alongside the independent importers.

But it is the consumers who are likely to feel the biggest pinch as players pass on these new costs. The cheapest imported bikes used to retail at an average of Sh60,000 in 2013. The prices rose to Sh85,000 after VAT was introduced last year. The new Sh10,000 excise tax would push the cheapest price to about Sh100,000.

“Boda boda is among the biggest employers in Kenya today. It gives earnings to people through ownership, operation, parts and service people and those in the sales channels,” Mr Gidoomal said. The motorcycle assemblers directly employ over 5,000 people. It is expected that this number could rise to 20,000 if a plan by the Kenya Association of Manufacturers  to assemble the bikes locally makes it to the implementation stage.

“The localisation plan with which the assemblers undertake to make 35 per cent of parts in Kenya by 2025 will not materialise since it is based on annual volumes of new motorcycles. All the assembly plants are likely to close,” Mr Gidoomal said. Lower taxes in the sector had seen the sector put more than 500,000 bikes on the Kenyan roads today, majority of who are motorcycle taxis.

It is estimated that on average, every boda boda serves about 30 passengers a day, which means 15 million people benefit from this industry daily. Boda boda industry emerged as an alternative means of transport to offer convenience for both people and goods and has significantly contributed to the Kenyan GDP.

Available data shows that 111,124 motorcycles were registered in Kenya last year. On the basis of the average import of a motorcycle, over Sh2 billion was paid to the Exchequer in form of direct taxes only.

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