Kenya’s proposed Finance Bill 2024 has sparked concern and disappointment in the country’s progress towards climate leadership and green fiscal policies.

This bill aims to impose a 16% value-added tax (VAT) on electric bicycles, solar batteries, and electric buses, reversing the previous VAT exemptions that were put in place to encourage the adoption of renewable energy and e-mobility.

A Step Back for Green Technology

Kenya’s environmental objectives are disrupted by this policy change.Here’s what’s at stake:

• Higher Costs, Lower Uptake: The VAT hike will make clean technologies like electric bikes, buses, and solar energy solutions more expensive. This could discourage consumers and businesses from making the switch, slowing down the transition to a greener future.
• Recycling Industry Impact: The tax increase extends to machinery for plastic recycling plants, hindering efforts to manage plastic waste effectively. This could lead to increased landfill use and environmental pollution.
• Investor Confidence Shaken: The inconsistency in policy sends a worrying message to investors. This could discourage them from supporting Kenya’s green initiatives.

The E-Mobility Push at Risk

The proposed tax directly contradicts Kenya’s recent efforts to promote e-mobility. Here’s how:

• Contradicting the E-Mobility Policy: The tax undermines the goals of the April 2024 e-mobility policy, which aimed to boost local EV production and incentivize battery manufacturing. This creates a confusing and contradictory message.
• Stifling EV Growth: The tax increase could significantly raise the cost of electric vehicles, already facing an uphill battle against cheaper fossil fuel options. This could significantly slow down EV adoption.

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Industry Voices Their Concerns

The proposed tax, set to go into effect on July 1, 2024, comes at a time when the country has seen a notable surge in the adoption of electric vehicles and motorcycles. Industry players have raised concerns about the potential increase in the cost of solar batteries and the impact on the growth of the EV market in Kenya.

• Battery Manufacturers: Industry leaders fear the tax will hinder EV market growth by making lithium-ion batteries more expensive.
• Electric Vehicle Companies: EV companies want existing taxes on EV components and infrastructure removed to make EVs more competitive with traditional cars.
• Electric Mobility Association of Kenya (Emak): Emak advocates for removing import duties and VAT on various EV components and infrastructure, including electric bikes, motorcycles, and charging stations.

Kenya successfully lobbied for similar tax exemptions in the 2021 Finance Act. The industry hopes to replicate this success and achieve zero-rating for crucial green technologies.

Emak President Herdeen Mose believes this would allow the electric vehicle industry to reach 800,000 units by 2028.These lobbying efforts reflect the commitment to nurturing a conducive environment for the adoption of EVs and advancing the country’s e-mobility sector.

Kenya stands at a crossroads. Will they maintain their position as a climate leader by upholding their commitment to green initiatives? Or will this proposed tax derail their progress towards a sustainable future?

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The ongoing discussions and advocacy around the taxation of electric vehicles and associated components echo the importance of creating favourable policies to support Kenya’s sustainable and green transportation agenda.

The potential impact of these tax policies on the country’s EV market and its transition towards a greener future makes it a pivotal issue for stakeholders and policymakers to address collaboratively.