What happened

President William Ruto recently announced a set of new tax measures that will directly impact motorists, the construction industry and the Kenya Revenue Authority (KRA). The announcement, made during a national fiscal briefing, outlines higher levies on fuel, road‑use taxes for private and commercial vehicles, and a construction levy aimed at large‑scale building projects. In addition, the budget allocates extra resources to KRA for improved tax collection and enforcement. The reforms are part of the government’s broader effort to broaden the tax base and raise additional revenue for the 2024/25 fiscal year.

Context and background

Ruto’s fiscal agenda has focused on expanding revenue without overly burdening low‑income households. Earlier this year, the administration introduced a modest increase in the value‑added tax (VAT) on certain goods and a digital services tax to capture revenue from online platforms. The latest package builds on those efforts by targeting sectors that have historically contributed a smaller share of total tax receipts. Motorists have been a focal point because fuel consumption remains a sizeable source of indirect tax, while the construction sector has grown rapidly, prompting the government to tap into its profitability.

The Kenya Revenue Authority, under the leadership of Commissioner General Kithinji Githaka, has been tasked with implementing the new rules and tightening compliance. KRA has previously faced criticism over low collection efficiency and perceived loopholes, especially in the transport and construction arenas. By granting KRA additional budgetary support, the government hopes to modernise its IT systems, increase field audits, and reduce tax evasion. The reforms also align with the “Vision 2030” goal of improving public finances and funding infrastructure projects such as the Standard Gauge Railway and new highways.

Compared with what is normal

Historically, Kenya’s fuel levy has hovered around 5 % of the retail price, and road‑use tax for private cars has been a flat annual fee of roughly Sh 1,500. The new legislation proposes to raise the fuel levy to 7 % and adjust the road‑use tax to a tiered system based on engine size, with rates ranging from Sh 2,000 to Sh 5,000 per year. For the construction sector, the previous levy was a modest 2 % on the value of contracts exceeding Sh 50 million; the revised rate is set at 4 % for projects above Sh 30 million. Below is a quick comparison:

• Fuel levy: 5 % → 7 %
• Road‑use tax: flat Sh 1,500 → tiered Sh 2,000‑Sh 5,000
• Construction levy: 2 % → 4 %
• KRA budget: modest increase → 15 % boost for enforcement tools

Why it matters

For motorists, the higher fuel levy and revised road‑use tax will translate into higher monthly expenses, especially for commercial fleets that rely on diesel. Small transport operators may see profit margins shrink unless they adjust pricing or improve fuel efficiency. Builders and real‑estate developers will face higher project costs, which could be passed on to homebuyers, potentially slowing down the already brisk housing market. On the other hand, the increased revenue earmarked for KRA could improve tax administration, leading to more consistent enforcement and fewer surprise audits for compliant businesses. Overall, the reforms aim to create a more equitable tax system, but they also require careful cash‑flow planning by SMEs.

Practical steps

• Review your vehicle operating costs and explore fuel‑saving measures such as regular maintenance, tyre inflation and route optimisation.
• If you run a construction business, reassess project budgets to factor in the higher levy and consider negotiating fixed‑price contracts early to lock in costs.
• Engage with your accountant to ensure all tax registrations are up‑to‑date, especially for the new road‑use tax categories.
• Monitor KRA communications for any filing deadlines or new compliance forms related to the construction levy.
• Consider short‑term financing options to cushion cash‑flow impacts while you adjust pricing or cost structures.

Beavoren Ventures offers a specialised Tax Planning & Compliance service that helps businesses navigate new tax rules, optimise liabilities and stay ahead of KRA requirements.

Need help with compliance? Email info@beavorenventures.co.ke or call +254 716 296 857.

Disclaimer: This article is informational and does not constitute formal tax, audit or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.