High Court Halts KRA’s New Vehicle Tax

The High Court has issued a temporary suspension on the implementation of a new tax regime introduced by the Kenya Revenue Authority (KRA) targeting used motor vehicle imports.

The court order, delivered by Justice Joe Omido on June 30, 2025, halts the rollout of KRA’s updated Current Retail Selling Price (CRSP) schedule, which was set to take effect on July 1, 2025.

The decision follows a petition filed by public interest litigants, including Faith Akinyi, who challenged the legality and fairness of the new CRSP framework.

The petitioners argued that the KRA introduced the changes without proper public participation, violating Article 10 of the Constitution, which mandates inclusivity and transparency in public finance matters. They also claimed that KRA failed to engage ordinary consumers and only consulted a select group of car dealers, leaving out broader stakeholders affected by the valuation changes.

Further, the petitioners asserted that the CRSP guidelines qualify as statutory instruments and should have been subjected to parliamentary scrutiny under Article 94(6) of the Constitution and the Statutory Instruments Act. They argued that this requirement was overlooked, making the new CRSP unlawful.

In addition, the 30-day notice period before implementation was deemed arbitrary and unfair, especially considering that the vehicle importation process typically spans three to six months. Importers who purchased cars under the previous tax system would have faced sudden and significant cost increases had the new prices been enforced.

One of the most contentious issues raised was the accuracy of the new CRSP listings. Petitioners and auto industry players highlighted inconsistencies and errors in the document, including mismatched vehicle models, incorrect fuel types, missing popular car brands, and discrepancies in chassis classifications.

These flaws, they argued, would have led to inflated valuations and taxation, causing financial losses to importers and consumers.

Justice Omido, after reviewing the arguments, agreed that the petition raised substantial legal and procedural questions that warranted further examination.

He issued conservatory orders suspending both KRA’s circular dated May 22, 2025, and the public notice dated May 30, 2025, which had announced the implementation of the new CRSP. The judge emphasized the need to protect public interest and prevent potential harm while the matter is under judicial consideration.

The suspension will remain in effect until July 17, 2025, when the High Court will reconvene to hear the full case. In the meantime, vehicle importers and dealers are allowed to continue using the 2019 CRSP valuations, which were previously in effect.

This ruling has been welcomed by importers and consumer rights groups, who see it as a crucial intervention to prevent rushed and potentially harmful policy implementation. It also sends a clear message to government agencies on the importance of due process, transparency, and public participation in regulatory decisions that affect the livelihoods of ordinary citizens.

The outcome of the case is expected to set a precedent not only for tax policy implementation but also for how statutory instruments are introduced and enforced in Kenya. As the court prepares to hear the matter in full, stakeholders are hopeful that the process will lead to a more balanced and consultative approach to tax reforms affecting the motor vehicle sector.