Now plan to tax MPs dropped

The Government was on Tuesday forced to withdraw a proposal to tax MPs perks as a condition to allow debate on the Finance Bill.

Initiating debate on the Bill in Parliament, acting Finance Minister John Michuki declared that the proposal to impose taxes on MPs and other constitutional office holders had been withdrawn.

The move was also a reprieve to judges who had already seen their salaries taxed, the Attorney General, members of the Public Service Commission and the Electoral Commissioners.

The Bill which enacted the law on new taxation measures spelt out in the Budget had been frustrated by MPs for the last two weeks.

Last week, they sabotaged the Bill when they engineered lack of quorum, forcing Parliament to adjourn early so as not to discuss it.

And during a morning MPs’ Kamukunji meeting in the Old Chambers, Mr Michuki was told to withdraw the clauses before they embark on debating the Bill.

“The proposals to impose taxes on allowances of MPs and constitutional office holders have been withdrawn and we go back to the position the budget was read in June this year,” he said to the thunderous foot thumping of MPs.

The withdrawal of the proposal was a culmination of intense consultations between MPs, the Parliamentary Committee of Finance and the President in order to pave way for the rest of the taxation measures to be debated and passed by MPs.

Court of law

There were fears that the Government may be unable to levy taxes after December 31 if MPs failed to pass the Finance Bill.

Normally, once passed, the Finance Bill gives the Government (Kenya Revenue Authority) the mandate to legally levy taxes without fear of being opposed in a court of law.

In deed, internal Security Minister George Saitoti while seconding the Bill confirmed the fears by stating that should the lawmakers fail to pass the Bill by December 31, KRA would not have the authority to collect taxes.

“If this Bill is not passed by December 31, the Kenya Revenue Authority or Government for that matter will not be able to levy taxes and in so doing it will be unable to provide any services to Kenyans,” Mr Saitoti observed.

The Finance Bill carries proposals on excise duty, import duty, Value Added Tax (VAT) and miscellaneous duties through which the Government raises funds to run the country.

The Nation learnt that Mr Michuki had agreed in principle with MPs in an informal meeting (speaker’s Kamukunji) to withdraw the offensive proposals from the Bill in order to give them confidence that the Government will not go behind their backs to tax them.

The meeting attended by about 30 MPs asked Mr Michuki to delete the section proposing to tax MPs altogether.

In a stormy meeting on Tuesday morning at Parliament’s Old Chambers, the MPs reminded the minister that their salaries and allowances were recommended by the Cockar committee and therefore it should not be taxed.

Others said that they had already committed their salaries to other loans and wondered what would be taxed.

Mr Michuki had last week struck a deal with Finance and Trade Committee chaired by Nambale MP Chris Okemo to withdraw the proposals during the second reading, but at the committee stage introduced an amendment that would fix a deduction on the members allowance at Sh12,000.

Sources said the proposal had received the President nod and Mr Michuki passed over the message to the MPs during the Kamukunji.

In what signalled a consensus between Treasury and MPs, Ikolomani MP Bonny Khalwale praised Mr Michuki for his approach to the issue and told the House that in the past the Government attempted to push the taxation measures without seeking members consent.

Dr Khalwale said: “I thank the minister for the tone of his speech, especially noting that where we have come from, the presentation of such Bills was not in the way it has been done.”

Each MP would have paid Sh120, 000 per month tax in car maintenance allowance if the proposal was not deleted.
MPs are taxed Sh64,000 on their monthly basic salary of Sh200,000.

However, all their monthly allowances amounting to about Sh800,000 are not taxed.