PSC undecided on MPs tax row

The Parliamentary Service Commission (PSC) on Wednesday failed to decide whether legislators will pay tax.

Instead, PSC will seek audience with the President, the Prime Minister, the Vice President and “all other concerned parties” to “negotiate” a way out of the taxation requirement on lawmakers’ perks.

The commission also backed down on its hardline stance of outright opposition to the taxation of MPs’ perks, with a decision to “engage” the taxman on the way out of the current push and pull between the Executive and the Legislature.

The decision comes just a week to the resumption of Parliament’s sittings at which it is expected that MPs will arm-twist and blackmail the Executive not to tax their perks, and instead force it to wait and do so after the next polls.

The Kenya Revenue Authority, bolstered by the powers enshrined in Kenya’s 10-month-old Constitution, has asked MPs, judges and other constitutional office holders to pay tax on their perks, because the new law does not permit anyone to be exempted from paying tax just because of the office that they hold.

House Speaker Kenneth Marende on Wednesday said that Parliament was trying to meet “everyone” involved, so as to reach an “amicable solution”.

Mr Marende spoke after he chaired the PSC meeting, which the MPs mulled over several options that they could use to keep the taxman at bay from their perks, at least until, after the next polls.

“We’re not going to elaborate on the options until all the parties are involved,” Mr Marende told Nation. “When you want to negotiate, you do it on a level playing field on the basis of mutual trust.”

It is understood that the Attorney General Amos Wako, Finance Minister Uhuru Kenyatta, the KRA boss Michael Waweru and Commission for the Implementation of the Constitution are all lined up to meet the PSC to shed light on why the provision is important, why it took effect on August 27, 2010 and why MPs have to respect it.

Most lawmakers, including the Speaker have cited a letter from KRA that assured them that their perks won’t be taxed until after 2012.

It is not clear how the Speaker and the PSC plan to handle the talks, given that the alleged KRA letter shielding their perks from the taxman was a product of such talks, that have already been dismissed as a “gentleman’s agreement”, used to dupe MPs into supporting the Constitution in the August 4, 2010 referendum.

Besides, the Speaker has accused the President, the Prime Minister Raila Odinga and the Vice President Kalonzo Musyoka and the KRA of going back on their word and trooping to the taxman to pay up tax arrears dating back to August 27, 2010.

“We have to settle the matter to satisfy the public interest, the interest of the Executive and that of the legislature as well,” Mr Marende said.

The public expects MPs to pay tax; the Executive needs that money to run the country; and MPs are afraid of losing a third of their income to the taxman.

A bargain for these competing interests would be a hard mountain to climb.

On Wednesday, the Speaker disowned last month’s PSC’s stand at which the vice chairman Walter Nyambati, and commissioners Olago Aluoch and Jamleck Kamau labelled KRA as 'mischievous, malicious and inciting the public’ following the directive that they had to pay tax on their perks.

Mr Marende was in London at the time, and after looking at the commission’s records on Wednesday, he said, he did not see any record at which the PSC declined to pay tax on MPs’ allowances.

“It is not documented anywhere. There’s no record of such proceedings in the commission’s minutes of that day,” he told the Nation.

After the PSC meeting on Wednesday, all the commissioners declined to speak about the content of the closed-door discussions, saying they had agreed that only the Speaker addresses the country on the matter.

Even those who would speak on condition of anonymity remained tight-lipped insisting that the matters discussed were “serious this time” and that only the Speaker, as the chairman of the commission, could address the matter.

After the meeting, the Speaker - who had strolled to the meeting from his office in Parliament - was sneaked out of County Hall through the private entrance and driven to the main Parliament building.

It is after a feisty inquiry that he returned the call made to his cellphone, saying that he was not avoiding the media.

“I speak for the legislature. I work for a team and I am the captain; the commander of that team. You don’t expect me to abdicate my responsibility by abandoning that team,” the Speaker said.

Constitution on tax

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.

MPs have 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.

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.

They agree that section 210 (3) of the new law is clear that they pay tax. But they argue that doing so would deny them a right they already enjoy.

Still, the new Constitution favours MPs at 259(1), which directs that the Constitution shall be interpreted in a manner that “advances the rule of law, the human rights and fundamental freedoms in the Bill of Rights; permits the development of the law and contributes to good governance.”

If the legislative, representation and oversight mandate of the MPs is looked at through that lens, then they have an upper hand in seeking more money before taxation, or now that it is midway through their contract, they can as well enjoy the status quo until 2012.

Those backing this school of thought argue that if anyone goes to court to have MPs pay tax, the court is likely to be guided by article 20(4)(a), which directs that in interpreting the Bill of Rights, the court or tribunal “shall promote the values that underlie an open, democratic society based on human dignity, equality, equity and freedom; and the spirit, purport and objects of the Bill of Rights.”