House rejects bid to exclude low earners from tax net

Suba MP John Mbadi. FILE 

By EDWIN MUTAI

In Summary

• The National Assembly also blocked the reintroduction of taxation on capital gains, which was suspended in 1985.

MPs have rejected an amendment to the Finance Bill 2013 that would have seen
about 1.2 million Kenyans who earn less than Sh38,892 excluded from paying taxes.

The National Assembly also blocked the reintroduction of taxation on capital gains, which was suspended in 1985.

The Budget and Appropriation Committee rejected the amendment fronted by Suba MP John Mbadi because it would deny the government about Sh40 billion in revenue.

The committee took the decision on advice from Parliament’s Budget Office, which said about 1.2 million Kenyans earns less than 38,000 per month.

The committee, chaired by Mutava Musyimi (Mbeere), met earlier in the day to consider the proposed amendments to the Bill, where Mr Mbadi was accorded opportunity to defend his proposal. The MPs passed the Finance Bill 2013 last evening with minor amendments and it is now awaiting presidential assent.

EDITORIAL: Tax move pretentious

“The amendment by Mr Mbadi should not be admitted for consideration in the committee of the whole House,” said Mr Musyimi.

However, Mr Mbadi accused the committee of seeking to protect the rich, including MPs, after Speaker Justin Muturi ruled that the House could not consider proposals rejected by a committee.

Mr Mbadi wanted only income above Sh38,892 per month be subjected to 30 per cent taxation.

“My intention was to give more money in terms of disposable income to poor people who even don’t save. Increasing their disposal income would increase demand for goods in the economy,” he told the Business Daily after the meeting. Income of up to Sh10,184 per month attracts 10 per cent tax, according to the Income Tax Act.

A majority of civil servants, teachers and police officers earn less than 38,000 and had the amendment been adopted, it would have been a big relief to them.

Mr Mbadi said there was no justification to tax low income earners while shielding people who gain millions of shillings from property sales from tax
.

The tax on capital gains is 30 per cent in Uganda and 20 per cent in Tanzania.