Uhuru in fresh clash with MPs over taxes

Finance Minister Uhuru Kenyatta has run into a new whirlwind as MPs question his push for a free rein to adjust tax rates based on the cost of living.

Though the House Business Committee has put on ice amendments to the Finance Bill, 2011, until possibly Wednesday, the lawmakers are up in arms against a proposal to alter the law to give the minister powers to “adjust the specific rate of excise duty to take account of inflation”.

Budget Committee chairman Elias Mbau (Maragua) on Sunday said the proposal “did not make economic, commercial or even emotional sense”.

“Inflation changes every day, every month based on local and international pressures. It does not make sense to change excise duty rates as inflation changes,” Mr Mbau said.

He said the committee had asked Mr Kenyatta to withdraw the proposal but the mandarins at the Treasury had advised him against it. (READ: Finance Bill puts Uhuru in a dilemma)

Those in the know say if the minister gets his way, the move would be tantamount to allowing him to sidestep Parliament and arbitrarily levy additional taxes on Kenyans.

According to the Customs and Excise Act, such powers are only limited to a cut in the rate of duty on “maize, wheat, beans, milk or rice by any amount during periods of civil strife, national disaster or calamity declared under any written law for the time being in force.”

Upon revocation of the declaration, the minister has an obligation to increase the rates “by such amount as may be necessary to restore the rates prevailing before the declaration”.

Mr Martin Ogindo (Rangwe), who also sits on the Budget Committee, said the proposal was “dangerous”.

Borne by the consumer

“I don’t agree with it. Most of the things the minister wants leeway to increase tax on are going to affect the general welfare of the public. In any case, any increase in excise duty will be borne by the consumer,” he said.

“Ordinarily, a tax regime must be predictable. We don’t want a volatile regime,” said Mr Ogindo.

Mr Ogindo, whose proposal to control banking rates has been included in the Finance Bill, said the Treasury had to yield and allow the House to approve the amendments.

The Cabinet has already described the amendments as “suicidal” and urged the over 100 frontbench MPs to be in the House to ensure the amendments are defeated.

“If the minister has any misgivings, let him come to the House. We are sensible people, we’ll see the sense. But as it is, those amendments are there to stay,” said Mr Ogindo.