Secret deal struck to settle MPs’ tax

Members of Parliament have arm-twisted the Treasury into allocating Sh1 billion to pay their back and future taxes.

The secretly hammered sweetheart deal confirmed by senior Finance ministry officials familiar with the details could also see MPs’ salaries soar above Sh1.1 million and guarantee them Sh12,000 more on their take home pay. (Read: Defiant MPs pick top team for tax battle)

The agreement is in part fulfilment of a long-standing demand by MPs for the government to implement recommendations of the Akiwumi Tribunal on Parliamentary terms.

The deal was agreed at two separate meetings at the Treasury on Tuesday and Wednesday attended by top Treasury officials and two representatives of Parliament’s Public Accounts Committee, representing MPs who have refused to pay tax as demanded by the new Constitution, which requires all public officers to do so.

Even as the MPs were naming the 15-member committee to negotiate with the Treasury during a closed-door Speakers’ Kamukunji, they were aware of the deal but did not make it public.

The Kenyan taxpayer will be left to foot the huge amount of money that MPs owe the taxman if all goes according to plan.

In the deal, the Treasury will pay MPs an ex-gratia to compensate them for paying tax on all their income.

Though the amount involved is unclear, the MPs owe about Sh1 billion since August 27, 2010 when the Constitution was promulgated to August next year when elections are scheduled.

The MPs are reportedly eyeing the Sh2.5 billion that the Grand Regency hotel fetched when it was sold to Libyan investors in the 2009 controversial sale.

They want the PSC to use the money to pay the taxman what they owe.

These details emerged on the day that Parliament invited applications from the public for candidates to represent MPs’ interests in the yet-to-be formed Salaries and Remuneration Commission.

This is the team mandated to set the pay of all state officers, including MPs.

Sources at the Treasury told Saturday Nation that MPs attended the meeting, but when contacted, the MPs denied knowledge of any such meeting.

It has emerged that the 15-member team including Cabinet ministers, assistant ministers and backbenchers set up to work on modalities, could just be a ploy to hoodwink the public, because the deal has already been sealed.

The team, which includes Finance Minister Uhuru Kenyatta, has been told to report back to the House on Tuesday, when the lawmakers are expected to meet in yet another informal meeting that will be chaired by House Speaker Kenneth Marende.

Dr Julius Kones, who sits on the Public Accounts Committee, is one of those reportedly seen at the Treasury, but when asked about the meeting, he said: “I am not aware of it.”

However, he went on to propose how the stand-off between MPs and the Kenya Revenue Authority is likely to be sorted.

He said the 15-member ad hoc team is supposed to work with the budget committee to find the money.

The Konoin MP proposed that some money will be found from the contingency kitty and that some House programmes will be put on ice to cater for the lawmakers.

“MPs are not ready to pay taxes, unless there’s an increase in their income,” Dr Kones said, as he proposed that the Akiwumi tribunal report should be implemented.

The report recommended that MPs should be paid Sh1.1 million a month, and then pay tax.

The Treasury has now been arm-twisted to give in to the MPs’ demands.

The lawmakers want the Finance Bill 2011 examined to see what taxes can be raised and which ones can be reduced, before they approve the Appropriations Bill 2011.

The Finance Bill outlines how Sh1.15 trillion national budget will be raised.

The Appropriations Bill has to be approved by August 31, so that the government can access money to run its affairs.

The MPs are racing against the 30-day ultimatum after which KRA will take measures to recover back taxes since August last year.

The MPs are reported to be seeking to amend the Income Tax Act, the National Assembly Remuneration Act and the Parliamentary Service Pensions Act, all which will permit the PSC to remit tax on all their income. The changes will also compel the Treasury to raise their pay.

It is with this in mind that Mr Jakoyo Midiwo (Gem), who is among the 15-member committee on MPs’ taxes, told KRA to wait for Parliament to make laws and then tax them.

Mr John Mututho, who is a Member of Parliament’s Budget Committee said: “If Kenyans feel that the Sh1 billion is too much, let them evaluate the gains we have made in the last year.”

Mr Mututho did not attend the informal Thursday meeting, and pleaded ignorance about where the deal was cut.