Kenyan car buyers have been hit by a 35 percent import duty after the East African Community (EAC) approved an application by Kenya to raise duty on motor vehicles under the common external tariff, piling pressure on a sector being pounded by a depreciating currency.

The review of the import duty from the current 25 percent, which has been since approved by the EAC Council of Ministers, will result in double-digit increases in prices of imported cars including those carrying 10 or more passengers, station wagons, racing cars and those involved in the transportation of goods among others.

Effectively, this means that vehicles imported into the country will now fetch a higher price locally than they will in regional peers such as Uganda and Rwanda.

“The increase in customs duty on imported cars will translate to about a 14 percent increase in the cost of importing vehicles. A convergence of this duty hike and petrol price increase could see consumers move to green mobility,” said Robert Waruiru, the managing partner of Ichiban Tax and Business Advisory and also the chairperson of the Institute of Certified Public Accountants of Kenya Public Finance Committee.

“In the interim, local assemblers may feel the tailwinds of this policy change even as second-hand importers feel the squeeze, especially on the volatile exchange rate.”

The EAC deal also approved a request by Kenya to keep elevated taxes on household gadgets such as mobile phones and television sets for another year in efforts to support tax measures by the William Ruto administration to raise Sh211 billion in additional revenue this financial year.

The gazette notice was published on Friday by Burundi’s Minister for EAC Affairs Ezekiel Nibigira, who chairs the EAC Council of Ministers.

Dealers said the application of the new 35 percent import duty on second-hand and new imported vehicles will see prices of cars increase by hundreds of shillings, adding to the already higher prices as a result of weakening shilling and rising cost of credit.

In addition to import duty, vehicles attract excise duty ranging from 25 percent to 35 percent depending on the size of the engine and value-added tax of 16 percent, payable cumulatively and in that order.

This means a change in import duty impacts the excise and VAT charges as the value is compounded for taxation purposes.