Taxman’s shocker to hit Kenyan MPs’ paypackets

MPs have been hit with a massive tax demand after the taxman concluded that their total income plus allowances were subject to Pay-As-You-Earn as soon as the new Constitution became law.

The shocker from Kenya Revenue Authority (KRA) was relayed to the MPs in a letter to the Clerk of the National Assembly.

In the letter, KRA argues that MPs have been in breach of the Constitution since it came into force on August 27 last year, by not paying income tax on all their allowances.

The taxman now wants the MPs to pay back taxes from August last year, coming to nearly Sh2.9 million each.

KRA has invoked powers that allow it to appoint the officer in charge of payrolls in an organisation to act like a tax collection agent and either explain the anomaly or pay the amount.

The letter signed by domestic taxes commissioner John Njiraini directs that the MPs taxation will be effected from July last year.

On Monday, National Assembly Clerk Patrick Gichohi confirmed receipt of the letter but declined to divulge further details.

Major subsidies

Signs that KRA was out to implement the decision to tax MPs’ pay were given on June 2 when Commissioner-General Michael Waweru told members of a House Committee that MPs have to pay tax so that the government has enough money to meet major commitments at this time of high inflation. (READ: Kenya MPs and judges on tax notice)

In a meeting held last year to resolve the touchy issue of MPs’ taxation attended by President Kibaki, Prime Minister Raila Odinga and AG Amos Wako, it is understood that KRA through the President promised that MPs would not pay new taxes until the end of their current term.

MPs had complained that taxing them mid-stream would be unfair given that they had committed their salaries. Some threatened to campaign against the new Constitution until the issue had been sorted out.

Recently Mr Waweru told the Parliamentary committee looking into the high cost of living that if MPs agreed to pay tax, the country would net Sh1 billion that would go a long way in shouldering some of the subsidies Government is offering.

“If you pay tax, you’ll gain the moral authority to talk about tax, to use that tax and to even determine how that tax is used... No one should be exempted from paying tax,” Mr Waweru told the team chaired by Budalang’i MP Ababu Namwamba.

The new law requires all State Officers to pay tax. Assistant minister Peter Kenneth and Joint Government Chief whip Johnstone Muthama declared they would pay taxes on all their perks following a public outcry over MPs’ tax-free benefits.

MPs take home Sh851,000 a month, of which only 200,000 is taxed. The rest is in the form of fixed but untaxed allowances.