MPs now plot to deny government tax revenue

The Kenya Revenue Authority headquarters at Times Towers. MPs are now plotting to deny the government tax revenue. FILE 

By EDWIN MUTAI
 

 

In Summary

• Legislators have resolved to exempt Kenyans earning less than Sh50,000 from taxation, reduce salaries of all State officers by 37 per cent and cut the budget for constitutional commissions by 43 per cent.
• The legislators said they would ensure that the President and his cabinet; judges and all other State officers’ salaries were also reduced by 37 per cent.
• They said they would reduce the taxes charged on kerosene and petrol and amend the Fuel Levy Act to relieve the poor of the heavy tax burden.

MPs intend to deny the government tax revenue to support its Sh1.64 trillion budget in their bid to arm-twist the Executive into yielding to their demands for higher salaries.

The threats came a day after President Uhuru Kenyatta backed the Salaries and Remuneration Commission (SRC) after MPs voted to quash the notices setting their salaries at Sh532,500, 37 per cent lower than the Sh851,000 paid during the Tenth Parliament.

“If they can reduce our salaries, why can’t we exercise the power vested on us to help the poor by giving them tax exemptions?” Fafi MP Barre Shill said at a Press conference in Parliament last evening.

Fronted by Jimmy Angwenyi (Kitutu Chache), Mithika Linturi (Igembe) and John Mbadi (Suba) Mr Shill said legislators had resolved to exempt Kenyans earning less than Sh50,000 from taxation, reduce salaries of all State officers by 37 per cent and cut the budget for constitutional commissions by 43 per cent.

The legislators said they would ensure that the President and his cabinet; judges and all other State officers’ salaries were also reduced by 37 per cent.

They said Parliament would use its legislative power to graduate taxation from 10 per cent to 25 per cent on those earning a monthly salary above Sh50,000. This, they said, would be done through amendments to the VAT Act, the Finance Act and the Appropriations Act of 2013.

They said they would reduce the taxes charged on kerosene and petrol and amend the Fuel Levy Act to relieve the poor of the heavy tax burden.

“We are helping the Jubilee government to implement its manifesto, which promised to relieve Kenyans from high cost of living,” said Mr Angwenyi tongue-in-cheek. They said they were speaking on behalf of the 349 MPs.

“Starting Tuesday, we will be exercising our legislative power to cut commissions budget and enact legislation that will see each of the 12 or so offices have only three part time commissioners,” Mr Mbadi said.

Tax experts, however, said MPs have powers to pass laws but changing tax laws must be initiated by the cabinet secretary in charge of national treasury through a gazette notice.

“Given the present circumstance where Kenya Revenue Authority’s collection still falls below target, I don’t think the cabinet secretary will go that direction,” said Nikhil Hira, a tax partner at Deloitte.

Section 7 of the VAT Act I, for instance, is categorical that only the Cabinet Secretary in charge of National Treasury can initiate the change in rates but this is limited to 25 per cent up or down. That means VAT, currently at 16 per cent, would only be reduced to 12 per cent.

“If there is no law, we will create one to support what we intend to do. We have power to make and unmake legislation,” said Mr Mbadi.

Mr Angwenyi said MPs were now concerned about the welfare of Kenyans after realising that the salary issue had been used to drive a wedge between the legislators and the electorate.

“We have realised the cost of living is too high because of high taxation. The House must rise to reduce tax on fuel and other basic commodities,” Mr Angwenyi said.

He said Treasury would be able to save Sh17 billion if the salaries of state officers were reduced by the same margin compared to Sh1.2 billion in the case of MPs.

Mr Linturi criticised SRC chairperson Sarah Serem and Charles Nyachae of CIC, terming their threats of legal action against Parliament officials a violation of the Constitution.

(Read: SRC warns parliamentary clerks over MPs' pay)

“This House must be respected because it exercises sovereign power on behalf of Kenyans. Don’t issue threats to any State officer serving here because we will show you who is actually in charge,” he said.

The MPs said they had not abandoned their quest for Sh851,000 monthly pay, saying as far as they were concerned, the Parliamentary Service Commission would pay the amount after the SRC notices were annulled.

However, the Law Society of Kenya on Thursday obtained an injunction against the MPs being paid higher salaries.

Justice David Majanja on Thursday stopped PSC from paying enhanced salaries, pending the hearing and determination of the case. That means the MPs will now be paid the Sh532,500 set by the SRC.

In the first nine months of 2012/13 financial year, KRA collected Sh560.4 billion, the Sh35.7 billion being VAT from the large tax payers segment alone. The taxman blamed delay in passing revised VAT Act, which seeks to introduce taxes on most essential goods, for a loss amounting to Sh11 billion.

Experts have won that a successful raid on domestic taxes, which accounted for 68.6 per cent of the revenue collected by government between July 2012 and March 2012, would completely paralyse government operations.

“It is the desire of the whole economy to have lower tax rates plotting huge cuts overnight would obviously plunge the country into bigger problems,” Mr Hira said.

Civil society leaders read mischief in the move to reduce taxes. Consumer Federation of Kenya (Cofek) secretary-general Stephen Mutoro said any Bill to repeal tax laws would eventually require assent of President Kenyatta.

“I see this as the last kick of a dying horse. Kenyans are so annoyed with MPs to an extent that even populist moves such as raising tax brackets and reducing cost of fuel will not change their attitudes,” Mr Mutoro said.

He said the MPs must live within the package offered by the SRC and join the Executive in looking for ways of bridging the current fiscal deficit if they want to win the support of the masses.