Latest ploy in taxation dispute
MPs plan to frustrate the review of public salaries as a trump card to deflect public pressure on them to pay taxes on their hefty perks.
Their plan is to arm-twist the Executive to increase their pay to Sh1.1 million as recommended by the Akiwumi Tribunal to cushion themselves from the impending taxation.
To do this, the MPs will frustrate the formation of the Salaries and Remuneration Commission, the legal body mandated to review salaries of public officials, until after their pay is reviewed upwards.
The Bill setting up the commission is scheduled to return to Parliament after the President proposed amendments to it last week.
MPs will put it on ice and wait to see if the Kenya Revenue Authority (KRA) goes after them as it has threatened.
Kisumu Town West MP Olago Aluoch, who sits in the Parliamentary Service Commission — the equivalent of the management in Parliament — said MPs will push for the implementation of the recommendations of the Akiwumi tribunal as soon as possible.
“When worst comes to worst, that is what we will do,” Mr Aluoch said at Parliament Buildings shortly after he addressed a charged news conference at which the PSC said it won’t pay tax on MP’s perks.
The lawmakers are considering this option after it dawned on them that the gentleman’s agreement between the Kenya Revenue Authority, the Treasury and the President — that MPs will not pay tax on their allowances until after 2012 — may come to nought.
This is because KRA, which had initially assured them that their perks wouldn’t on’t be touched, has said that according to the new Constitution, all public officers must pay tax.
The MPs are also considering putting pressure on Finance minister Uhuru Kenyatta to invoke his powers under Section 123 of the Income Tax Act and order the Commissioner of Domestic Taxes John Njiraini to stop plans to tax their perks or ask the taxman to go to the Supreme Court to determine the correct position.
The section requires the commissioner to refrain from collecting tax in cases where there is “uncertainty as to any question of law or fact” and to seek the minister’s opinion on the way forward to resolve the ambiguity.
Enjoys tax break
Mr Kenyatta, as an MP, enjoys the tax-free perks. At the same time, he wants MPs to approve his Sh1.2 trillion budget even as he endeavours to ensure the issue does not hurt his political standing among the public as he eyes State House in next year’s General Election.
The Constitution in article 210(3) makes it mandatory for every public officer to pay tax on their income. Exemptions and waivers are prohibited if they are based on the office or nature of work of the state officer.
But the lawmakers, with the support of Justice minister Mutula Kilonzo, are banking on the use of the word “may” to argue their case, saying the word “means may or may not”.
The MPs have resorted to reading closely every article in the Sixth Schedule and looking at the opportunities it offers them to dodge the taxman.
Mr Aluoch said the Transitional and Consequential Clauses “saved” the powers of the PSC to review their salaries, under the Sixth Schedule at section 3(2). Section 45B(5)(h) of the hitherto repealed Constitution gives the commission the power to review the pay of MPs and this it did through the Akiwumi tribunal, whose implementation is pending with the Executive.
“From time to time, as necessity arises, to appoint an independent body to review and make recommendations on the salaries and allowances of the members of the Assembly,” reads the section that is still operational under the Sixth Schedule.
In a separate interview, MP John Mbadi (Gwassi) told the Sunday Nation that even though the President had a “history of not honouring MoUs”, he ought to be “decent because he is dealing with the Parliament of the Republic of Kenya”.
“Let KRA, the President and Prime Minister keep their word to MPs.
“They assured us that the clause to pay tax will not take effect in the current Parliament. Let them respect that promise,” Mr Mbadi said.
