Govt to Introduce Traffic Congestion Levy, More Taxes on Fuel & Insurance Premiums

In Summary 

• The government plans to reintroduce taxes on car insurance premiums and carbon emissions while expanding toll charges to raise funds for road construction and maintenance.
• Affordable housing units will be registered under the Sectional Properties Act, ensuring homeowners receive sectional property titles upon full payment.
• KRA has intensified its anti-corruption drive, dismissing 19 employees and enhancing collaboration with EACC to curb tax fraud.
• Private universities are struggling financially due to a Ksh50 billion debt from the government, affecting operations and expansion.
• Equity Bank has cut interest rates by 3%, aligning with CBK’s directive to make loans more affordable.
• Most Kenyans saw their incomes shrink in 2024, pushing many to cut costs, start businesses, and rethink their financial plans.
• EPRA has hinted at a fuel price increase due to higher global crude oil costs, with the final decision expected soon.

‍

Motorists in Kenya could soon pay more to operate their vehicles as the government moves to reintroduce taxes on car insurance premiums and carbon emissions to raise funds for road construction and maintenance. The draft National Tolling Policy that was published on Tuesday, Feb 12 proposes to increase the fuel levy, introduce road tolls, and imposing an insurance premium tax to address a funding gap in the road sector, which is facing a Ksh4.05 trillion deficit over the next decade. The Business Daily reports that the Ministry of Road has also proposes a congestion levy and a pollution tax would target motorists in major urban centres such as Nairobi, Mombasa, Kisumu, Eldoret, and Nakuru, similar to policies in cities like London and New York. The government also plans to introduce toll charges across the road network, with fees based on vehicle classification, maintenance costs, and potential benefits to road users. These proposals come after the failed attempt to introduce a 2.5 percent motor vehicle insurance tax in the 2024 Finance Bill, which was dropped following widespread protests.

In a report by The Standard, Kenyans purchasing homes under the Affordable Housing Programme (AHP) will receive sectional property title deeds as proof of ownership, according to AHP Board Acting CEO Sheila Waweru. The titles, issued upon full payment, will ensure homeowners have legal ownership while a management company will oversee common areas. The registration will follow the Sectional Properties Act, 2020, which mandates a survey, registration of sectional plans, and formation of a corporation for unit owners. The government plans to release the first 4,800 units by the end of next month, with the registration process involving six key steps, including titling, transfer of land, preparation of sectional plans, and issuance of sectional titles.

Private universities have urged the government to settle a Ksh50 billion debt accrued over the last nine years from unpaid student disbursements. Kenya Association of Private Universities (Kapu) chairperson Reverend Prof Stephen Mbugua said at least 34 universities have not received payments since the 2015/16 financial year, affecting their operations and infrastructure development. Kapu Treasurer Prof Washington Okeyo added that institutions have been forced to seek alternative funding sources, including bank loans and student contributions, as the government has not remitted funds for state-sponsored students, as reported by The Star.

The Kenya Revenue Authority (KRA) has fired 19 employees in the second quarter of the 2024/25 financial year over allegations of fraud, dishonesty, absenteeism, conflict of interest, and other ethical breaches. The Standard reports that during the same period, KRA received 246 corruption reports via iWhistle, revealing Ksh4.39 billion in tax lossesGovt . The authority also conducted six lifestyle audits and vetted 117 employees as part of its anti-corruption efforts. In a strategic meeting, KRA Commissioner General Humphrey Wattanga and EACC CEO Abdi Mohamud pledged stronger collaboration to combat tax evasion and corruption, warning of strict penalties for those who exploit the system.

Equity Bank has reduced interest rates on all new and existing Kenya Shilling-denominated loans by 300 basis points (3%), effective February 13, 2025, for new loans and March 1, 2025, for existing ones. Capital Business reports that this follows the Central Bank of Kenya’s decision to cut the Central Bank Rate to 10.75% and marks the third rate cut by Equity in six months. Managing Director Moses Nyabanda said the move aims to ease financial pressure on Kenyans and boost economic growth by making credit more affordable. Other banks, including KCB and Co-op Bank, have also lowered their rates in response to CBK’s directive.

A new report by Old Mutual shows that 70% of Kenyans experienced a drop in income in 2024, leading to financial insecurity and increased stress levels, as reported by The Business Daily. The Old Mutual Financial Services Monitor (OMFSM) found that rising living costs, unemployment, and a tough business environment have eroded economic confidence, with only 30% of respondents able to cover monthly expenses comfortably. Many Kenyans are cutting back on spending, downsizing their homes, and turning to entrepreneurship, though 84% of small businesses remain uninsured. Despite financial struggles, the number of people saving for retirement has risen from 26% in 2023 to 36% in 2024, though confidence in saving enough has dropped.

Kenyan motorists should prepare for higher fuel prices as the Energy and Petroleum Regulatory Authority (EPRA) has indicated a possible increase on February 14, 2025. In a report by Citizen TV, EPRA Director General Daniel Kiptoo attributed the expected hike to rising global crude oil prices, driven by geopolitical factors such as sanctions on Russian products by the outgoing U.S. administration. The monthly fuel price review considers global oil prices, exchange rates, and other market trends, with EPRA still computing the final figures before consulting the government on possible price stabilisation measures. Currently, fuel prices stand at Ksh176.58 for Super Petrol, Ksh167.06 for Diesel, and Ksh151.39 for Kerosene in Nairobi, with slightly lower prices in Mombasa and similar rates in Kisumu.