Plans by the government to finance its Sh3.074 trillion budget suffered a setback Thursday as the National Assembly thwarted its proposal to impose a 10 per cent excise duty on fees charged for money transfer services as contained in the Finance Bill 2018.
Treasury Cabinet Secretary Henry Rotich had proposed the rate to be charged on transactions made by banks, money transfer agencies and other financial service providers to fund the Budget.
The move by the MPs, who ganged up to defeat the proposal during the consideration of the Finance Bill, now leaves the government scratching its head on where to get the extra revenue to finance the ambitious Budget passed by the House in June.
This comes at a time when revenue collection is not doing quite well as the critical sectors of the economy continue to perform poorly.
However, the fate of the proposal now lies with President Uhuru Kenyatta on whether to sign the Bill into law or return it with a memorandum detailing areas for consideration.
The MPs also dealt the government another blow when they defeated a proposal to impose a 0.05 per cent excise duty on Sh500,000 or more transferred by banks, money transfer agencies and other financial institutions.
ROBIN HOOD TAX
The 0.05 per cent duty was in line with ‘Robin Hood’ tax, which actually means taxing the rich more while safeguarding the poor, but MPs Chris Wamalwa (Kiminini) and John Kiarie (Dagoreti South) opposed the move, saying that it was instead geared to rob the poor.
“If this proposal goes through, you will be opening the Pandora’s box because tomorrow, they will tax the salaries sent to your employees at the constituency offices,” Mr Wamalwa said.
Mr Kiarie argued that the clause, which was recommitted on Wednesday evening, will hit the users of M-Pesa and Airtel Money negating the principle of “Robin Hood” tax.
“Those who transact through mobile money are poor households and we must delete the provision in the Bill,” Mr Kiarie said.
Not even a proposal by the Finance and National Planning Committee chairman, Mr Joseph Limo, to exclude funds transferred from one’s individual account to another, taxes to and fro the Kenya Revenue Authority (KRA) as well as those by or to the national and county governments or Central Bank of Kenya, would convince the MPs.
But even as the MPs denied the government the funding, they approved a 12 per cent excise duty charged for money transfer services by cellular phone service providers.
The lawmakers also approved a new clause in the Banking Act that makes it mandatory for MPs to approve Central Bank of Kenya (CBK) regulations.