KRA Plans New Car Tax System, MPs Push to Remove Salary Deductions Cap for Govt Workers

‍In Summary:

• KRA will roll out a new valuation system for second-hand car imports by July 2025 to reflect current market prices after a court ruled the 2019 version unconstitutional. Depending on the revised values, car prices could either rise or fall.
  
•  Kenya has terminated a stalled highway PPP project with French firm Vinci SA due to unfavourable terms. The deal, signed in 2020, never broke ground and may now be awarded to a Chinese contractor.
  
• Top Kenyan banks earned Ksh61B more in 2024 due to wider lending margins, with net interest income up 19.3%. However, most lenders haven’t passed on CBK’s recent rate cuts to borrowers.
  
• Lawmakers want Section 19 of the Employment Act amended or scrapped to accommodate rising statutory deductions, which have left many workers with less than 30% of their gross pay.
  
• Kenyans are facing lower returns from savings, bonds, and stocks after government borrowing costs dropped and market volatility rose. The NSE lost Ksh74.3B in one week following the U.S. tariff hikes.
  
• New U.S. tariffs could cost Kenya Ksh12.9B in export earnings. While CBK downplays forex impact, the government is betting on local consumption and expanding manufacturing, especially in textiles.
  
• MPs are investigating land acquisition irregularities for the Nairobi SGR terminus after it emerged that Kenya Railways paid billions for land without title deeds. A field inspection and document review are underway.
  
  

The Kenya Revenue Authority (KRA) will introduce a new tax valuation template for imported second-hand cars by July 2025. The move follows dealer complaints over inflated duties due to outdated data in the current 2019 template. According to the Business Daily, a joint team of industry and KRA officials is updating the Current Retail Selling Price (CRSP) to include newer models and address legal issues after a court ruled that the 2019 version was unconstitutional. The updated CRSP could cause car prices to rise or fall based on revised valuations.

In a report by Citizen TV, Kenya has cancelled a Ksh190.8 billion highway expansion deal with a French consortium led by Vinci SA, originally signed in 2020, due to concerns over contract terms. The Kenya National Highways Authority (KeNHA) confirmed issuing a termination notice after failing to restructure the public-private partnership agreement. Construction had not started. Sources indicated that the project would now go to a Chinese contractor, though no official announcement has been made. 

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Kenya's top nine listed banks earned an extra Ksh61 billion in 2024 from higher lending margins driven by elevated interest rates. Net interest income rose 19.3% to Ksh376.4 billion, despite deposit payouts surging 49.3% to defend customer funds. Profits after tax climbed 21.9% to Ksh184 billion. However, most banks have yet to pass the Central Bank of Kenya’s interest rate cuts to borrowers. Lenders now seek a new industry-wide loan pricing model to replace the fragmented risk-based system, according to the Business Daily.

Members of Parliament are urging the Attorney General to scrap or amend Section 19 of the Employment Act, 2007, which caps salary deductions at two-thirds of an employee’s basic pay. The push comes amid increased statutory deductions such as the Housing Levy, Social Health Insurance Fund (SHIF), and revised NSSF contributions, which have reduced many civil servants’ take-home pay to below 30 per cent. The Public Accounts Committee has directed the Treasury to seek legal guidance on aligning the law with current deductions, as reported by The Star.

According to The Business Daily, Kenyan investors are facing declining returns across savings, bonds, and equities in 2025. After a strong 2024, government cuts to borrowing costs have pushed Treasury yields and deposit rates to single digits. The Nairobi Securities Exchange has also lost Ksh74.3 billion in a week, hit by global fears after new US tariffs. The CBK’s five rate cuts have further dampened fixed income returns, with deposit and MMF rates also dropping. Analysts warn of limited growth this year due to global uncertainty and last year’s unusually high base.

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In a report by The People’s Daily, Kenya risks losing Ksh12.9 billion in export earnings due to new 10% US tariffs imposed by President Trump, affecting key exports like apparel, tea, and coffee. CBK Governor Kamau Thugge downplayed the impact on exchange rates but expects reduced exports. Kenya is exploring local consumption growth and opportunities in manufacturing, especially textiles, as rivals face higher tariffs. Industry CS Lee Kinyanjui sees potential for Kenya to become a more competitive supplier to the US.

MPs are investigating the ownership of 74 acres of land where the Nairobi SGR terminus sits after discovering Kenya Railways bought it from Dupoto/Darfur settlement without title deeds—relying only on a letter of interest. KRC also paid Ksh2.7 billion for an adjacent 55 acres under similar conditions. Claims of forced evictions, unfair compensation, and alleged misappropriation of funds have surfaced. Lawmakers have summoned KRC and the Lands Ministry and ordered a field inspection and title deeds verification, as reported by The People Daily.

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