Treasury Principal Secretary Dr. Chris Kiptoo was tasked on Thursday night with providing information on the proposed 2.5% annual tax on the value of a motor vehicle.

PS Kiptoo stumbled over his words during an interview on Citizen TV's Tonight Show as he defended the government against stakeholder and public concerns that the motor vehicle tax was a double taxation on owners.

PS Kiptoo stated that the decision to implement the vehicle tax was based on the administration's agenda of raising adequate revenues to stabilise the country's economy, but he could not explain why the additional tax was imposed on top of the insurance premium, which is set at 4.5% of the vehicle's value.

Instead, he dismissed the concern as 'a non-issue,' stating that the matter would be reviewed later by Members of Parliament and that public opinion would be allowed on the subject.

“This is not the proposal of the National Treasury, the National Treasury takes into account the views that come through the budget-making process. We are operating in a very tight fiscal space and we have to really make very tough decisions. Some of these tough decisions are about trying to make sure that we live within our means. The issue of motor vehicle circulation shouldn’t be a big issue because there are many other options,” said Kiptoo.

The Show is host, Sam Gituku, was dissatisfied with the PS's response, demanding an explanation, because many owners of high-end vehicles costing more than Ksh.4 million would be significantly impacted.

He wanted to know how the tax would affect valuation and whether the imposed tax was included in the overall valuation.

Kiptoo stuttered in his response, claiming that valuation does not include taxes, but failing to explain the relationship between the two.

Sam: Does the valuation include taxes?

Kiptoo: I don’t think it has to include taxes, why must it include taxes?

Sam: Because the market value of Ksh.7.5 million includes the taxes paid during vehicle importation.

Kiptoo: But now, this tax applies to what you own, such as property.

Sam: But the value of what you own includes taxes, which were paid on it…

Sam: Isn’t it a tax on tax?

Kiptoo: It is not necessarily tax on tax, because if that were so, it would apply to many others that you have.

Sam: But there are no other assets you are taxing, are there?

Kiptoo: You have land for instance, don’t you pay some duty when you sell? But that is on a transaction, you are not selling a motor vehicle, are you?

The PS instead said the issue of motor vehicle tax was being overblown and asked the journalist to focus on other types of taxes. 

"I think this issue of tax, you are overblowing it because you are concentrating too much on this car circulation, can we look at others…we are saying as the Treasury, if there are better options that come from the public, we will go with that, we don’t have to insist on that," he said.

He added: "I think that this is one of the forms and if it is not something that the committee sees or the public doesn’t want, we don’t have to stick to it so much.

Despite saying the proposal would be debated by MPs and public opinions sought, Dr Kiptoo noted that the government would not withdrawal the tax.

"We are not going to withdraw; we are saying that if Parliament wants to find a better way, that is fine. Parliament is independent. So it is up to parliament," he stated.