Kenya’s government plans to gradually increase excise duty on cars running on fuel and introduce an annual wealth tax for car owners depending on the engine capacity.

The proposals are part of the draft medium-term tax revenue strategy, Business Daily newspaper reported.

The government will assess the viability of introducing motor vehicle circulation tax as a form of a wealth tax, the Treasury said.

The tax will be paid annually by motor vehicle owners at the point of acquiring an insurance cover. 

"There will be a minimum tax amount payable by all motor vehicle owners in addition to a graduated amount based on the engine capacity of the vehicle,” the Treasury added.

To promote eco-friendly vehicles, the government plans to slowly increase excise taxes on imported vehicles running on fossil fuels.

The latest proposals are in addition to January’s draft National Green Fiscal Incentives Policy Framework, which seeks to start charging congestion tax.  

Although the proposed tax is yet to be finalised, it will target cities such as Nairobi, Mombasa, Kisumu and Nakuru with congested roads.

(Editing by Seban Scaria seban.scaria@lseg.com)