Friday, October 5, 2012

MPs award themselves Sh2bn bonus in secret deal

The National Assembly. PHOTO/FILE

The National Assembly. PHOTO/FILE 

By ALPHONCE SHIUNDU ashiundu@ke.nationmedia.com

MPs have secretly added a Sh2.1 billion severance pay to their already huge package.

The higher perks, approved on Thursday night, however came about as Finance Minister Njeru Githae increased taxes to raise the money required to meet public servants’ demands for better salaries.

In the last-minute changes introduced in Parliament on Thursday night, each of the 222 MPs and House Speaker Kenneth Marende will take home a minimum package of Sh9.3 million on January 15 next year when their term expires.

Meanwhile, a 10 per cent Excise duty will now be levied on mobile money transfers such as M-Pesa, making the services more expensive. The services are run by banks, money transfer agencies and mobile phone companies.

The minister also raised taxes on beer, wine and other alcoholic drinks to Sh70 per litre – or 50 per cent of the ex-factory price – and on raw hides and skins destined for foreign markets in a bid to revive and improve local tanneries.

Mr Githae also has his eye on the money made in the data market – through cable, the Internet, fibre-optic and satellite – seeking to tax “gains or profits made from the business of transmitting messages”.

The mining industry will also pay more taxes after the House allowed Kenya Revenue Authority to tax proceeds from the sale of property or shares, more so for oil companies, or other firms involved in mining or mineral prospecting.

The vice-chairman of the Parliamentary Service Commission (PSC), Mr Adan Keynan, sneaked in the amendments, as approved by the Finance minister, just moments before the House concluded putting final touches on the Finance Bill 2012.

Once assented to, the Finance Bill grants the taxman the licence to collect taxes in order to meet the government’s revenue targets as prescribed in the annual national budget.

Tellingly, the amendment was not in the Order Paper like the ones by the minister on raising taxes, and not all MPs had access to it even after it was tabled. There was no debate on the clause; it was just approved, unanimously.

The change will see the Treasury calculate the “severance allowance” at 31 per cent of MPs’ pay, including their hefty tax-free perks. The computation will be based on their basic pay of Sh200,000 and all allowances – except sitting allowance – amounting to Sh651,000.

The perks include house allowance, extraneous duty allowance, transport allowance, entertainment allowance, vehicle fixed cost allowance and constituency allowance. Each of the 12 nominated MPs also get an allowance; so do the two ex-officio members — the Speaker and the Attorney-General.

Second time in six months

This is the second time in less than six months that the lawmakers have raided the public coffers to line their pockets as they scrounge around in their brazen bid to raise money for the political campaigns ahead of the General Election.

On April 19, again in at dusk, they changed the law to raise the severance package – hitherto called “the winding-up allowance” – from Sh1.5 million to Sh3.72 million per MP. And just as then, this week’s Sh5.6 million addition was made through the Finance Bill.

The mischief of raising their perks through the Finance Bill ensures that MPs can do it at the eleventh hour, quietly, and since it has to do with taxes it is guaranteed that the President will have no option but to assent to it.

The law, once enacted, will see the MPs paid at 31 per cent of their Sh200,000 basic pay for every year in service until August 26, 2010 when the Constitution was promulgated. From then until the end of their term on January 15, 2013, the calculation will be based on a gross pay of Sh851,000.

Not surprisingly, the lawmakers are unbowed by the legal requirement to have the pay issue handled by the Salaries and Remuneration Commission.

They also approved changes to have all regulations by the Commission on Revenue Allocation and the SRC subjected to parliamentary approval, meaning they hold the trump card should the two regulators step in.

Mr Githae and the Finance Committee chairman, Mr Chris Okemo (Nambale), meanwhile agreed to shelve the plan to backdate the payment of taxes on MPs’ perks to June 15 this year, when the budget was read.

The minister had hoped to repeal the law that MPs have consistently relied on to shield their allowances from the taxman but they struck a deal on the floor of the House with the committee to have the law apply after the next General Election.

Kenya’s Constitution makes it irregular for a state officer to be exempted from paying tax, regardless of the office they hold.

The term of the current MPs expires on January 15, 2013. After negotiating with the Treasury, the PSC had already earmarked Sh500 million to cover the taxation of the MPs’ perks until the expiry of their term.