Kenya could reintroduce the motor vehicle tax in a different form from the 2024 contentious proppsal where the tax was based mainly on road use.

Tax lobby groups are now proposing that cars be treated as an indicator of wealth.

The proposal by Oxfam Kenya and the Institute of Public Finance (IPF) seeks to revive the motor vehicle tax as part of a wider wealth taxation framework, nearly two years after a similar levy became one of the most contested measures in the 2024 Finance Bill.

Unlike the 2024 proposal, the groups want a system that clearly explains what constitutes taxable wealth, who is liable, how the amount payable is determined and how the tax would be collected.

The proposal would also introduce differentiated rates so that owners of vehicles with substantially different values would not face the same tax burden.

For example, a high-value vehicle such as a Porsche would not necessarily attract the same rate as a lower-value commercial or passenger vehicle such as a Toyota Probox.

IPF research assistant Vincent Kipkemoi said the motor vehicle tax should return to the policy debate as Kenya seeks to widen its tax base and shift a greater share of taxation towards wealth instead of relying heavily on income and consumption taxes.

He said the problem with the 2024 proposal was not necessarily the principle of using vehicles as a proxy for wealth, but the failure to clearly explain the rationale, the people who would be affected and how the tax would work.

“The concept about having a vehicle as a proxy for wealth was the biggest problem that maybe was not understood well, even people who did not own or drive vehicles opposed the proposal,” said Kipkemoi.

He said a redesigned levy would first require policymakers to establish what form of wealth is being measured, why a motor vehicle is an appropriate proxy and how the resulting tax burden would be calculated.

“Let us go a step further to explain what would be the proxy for this wealth and how would it be taxed and now who would actually carry the tax burden,” he said.

Under the proposed approach, taxpayers would need to be given clear guidelines on the basis of taxation, applicable rates, payment points and the categories of vehicles affected before implementation.

The groups also want the government to learn from the public backlash that followed the 2024 Finance Bill.

The Bill was eventually withdrawn after widespread opposition, with social media platforms including TikTok and X playing a major role in shaping public debate around the proposed taxes.

Kipkemoi said poor communication and misinformation contributed to public resistance and that future tax proposals would require citizens to be informed throughout the policy-making process.

“The citizens must really be informed throughout the whole process so that they understand it and now maybe argue for it or against it from an informed point of view,” he said.

Kenya Women Parliamentary Association legal adviser Daniel Murakaru said the motor vehicle tax should not be brought back in the same structure proposed in 2024.

He called for proportionality, arguing that taxpayers with different levels of wealth should not necessarily face the same effective tax burden.

For motor vehicles, Murakaru proposed differentiated rates rather than a blanket system based simply on vehicle ownership.

The proposed framework would therefore potentially link the amount payable to the value or wealth represented by the vehicle, creating different tax bands for different categories of vehicles.

The lobby groups have also questioned whether insurance should remain the point of collection.

Under the 2024 proposal, the motor vehicle tax was linked to the value of a vehicle and was expected to be collected through insurance-related payments.

“Policymakers should examine whether that mechanism fairly reflects the purpose of the levy and can we introduce differentiated rates in that context and is the insurance paying point... changed?” asked Murakaru.

A redesigned system would therefore need to determine not only the applicable rates but also whether insurance companies should continue serving as the collection point or whether another mechanism would be more appropriate.

The proposed changes are aimed at making the levy more predictable and linking the tax burden more closely to the value of assets held by taxpayers.

Murakaru also argued that Kenya's wider tax system places a heavier burden on salaried workers and consumers, while wealth and investment income remain comparatively undertaxed.

Oxfam economic governance and policy adviser Beverly Musili said any new wealth-tax proposals should also be linked to visible public benefits.

She argued that taxpayers are more likely to accept additional taxes when they can see how the revenue will improve public services.

Musili said Oxfam's research found that Kenya's inequality crisis is fundamentally a question of distribution and power.

IPF Head of Programmes John Nyangi said wealth taxation could provide additional domestic resources while helping address inequality.

He argued that Kenya's current tax system disproportionately targets labour and consumption, while assets and investment wealth remain relatively undertaxed.