Taxes: MPs plot fight back plan

By Alex Ndegwa

Forty MPs huddled for a secret meeting in Mombasa at which they narrowed their resistance to the demand to tax their entire earnings to three options.

They resolved to push for the implementation of pay increment recommended by the Parliamentary Service Commission (PSC) based on the report of the tribunal to review MPs’ pay. Justice Akilano Akiwumi headed the tribunal whose report Parliament adopted last year.

The tribunal, appointed in 2009 following public outcry over high salaries of legislators and their hefty tax holiday, recommended an MP’s monthly pay be raised to Sh1.1 million, up from Sh850,000.

This is to cushion them against the expected additional Sh200,000 in tax. Alternatively, it has been suggested Parliament’s budget, which is before the House, be amended to make provision for tax arrears due to the Kenya Revenue Authority.

Currently, MPs pay taxes amounting to Sh50,000, pegged on their salary of Sh200, 000. Sh650,000, which is paid to them in allowances, is not taxed.

The second strategy they are mulling over once Parliament reopens in 10 days is to frustrate approval of budgets for key offices, including Office of the President, Prime Minister and Vice-President, whose holders have since settled their tax arrears.

Express displeasure

This is to express displeasure with the Executive for allegedly duping MPs that members in the current Parliament would be spared the new tax measures. They are optimistic that this option would help them force the Executive to negotiate.

MPs are also said to have resolved to leave the third option – to precipitate dissolution of Parliament – as the last option, which they would only resort to if they would be pushed to the wall.

The MPs were in Mombasa to discuss the proposed Population Policy for National Development, but the tax issue has featured prominently at the retreat.

Speaker Kenneth Marende has accused the Executive of misleading Parliament, maintaining new laws should be enacted before legislators’ allowances are taxed. He says this position should not be interpreted to imply he is “shielding the Legislature against a constitutional provision”.

“I want to state clearly that I believe that the provisions of the Constitution and legislation related to taxation should be applied to the letter and that if Members of Parliament are lawfully liable to pay additional tax they should do so in accordance with the law,” Marende said.

On additional tax demands the Speaker has said the Finance Act is “explicit on how this should be done and what necessary Bills ought to be enacted to operationalise taxation measures”.

Lamu West MP Fahim Twaha had earlier let the cat out of the bag saying MPs would demand that the Akiwumi report be implemented to cushion them against taxation.

“We will take KRA to court to prove that our rights are being violated,” warned Kuresoi MP, Zakayo Cheruiyot.

Msambweni MP, Omar Nzonga, added: “We are even ready for Parliament to be dissolved over this issue because it had been agreed at the Kamukunji last year that (members of) this Parliament will not pay tax.”

“We are asking the Attorney General to give us the interpretation of the law before we decide the next course of action,” Assistant Minister, Mwangi Kiunjuri, said, wondering whether the AG had disowned his earlier legal opinion to advise the big three to pay up.

Cabinet minister Franklin Bett vowed they would not pay the extra tax until the law is reviewed. “We were duped by the three leaders and the AG that our allowances would not be taxed,” said Bett.

MPs have fought off additional taxes pegged on their current pay arguing they have a legitimate expectation that their remuneration shall not be altered to their detriment mid-term.

While moving the Motion for the adoption of the Akiwumi report last year, PSC vice-chairman Walter Nyambati said the take-home of MPs would be reduced by at least Sh200,000 once all allowances became taxable with the approval of the new Constitution.

“This could be largely detrimental to the Members of Parliament who were elected based on a certain take-home remuneration, and have consequently made arrangements based on that take-home remuneration,” he added.

The proposal to implement the Akiwumi report could, however, run into trouble with the Treasury because it comes at around the same time as another rejected last year.

Higher salaries

Last year Minister for Finance Uhuru Kenyatta resisted MPs’ demands, saying he had not made provision for higher salaries in the Budget just like this year’s. Uhuru explained the additional expenditure could only be financed either through additional borrowing or imposition of higher taxes, “both of which have far reaching adverse economic and social consequences”.

Such action would trigger demands for salary increment by other sectors, Uhuru noted. He added it would “lead to a wage spiral, hence creating inflation and weakening our competitiveness”.

Notably it’s the Finance minister who is supposed to present to the House the necessary Bills to amend the relevant laws.

The tribunal that reviewed the terms and conditions of service for members and staff of the National Assembly recommended the consolidated pay of an MP at Sh1.09 million. It recommended the PM earn Sh2.9 million, the VP Sh2.19 million, and the Speaker Sh2.1 million.

 If the recommendations were to be adopted, the Deputy Prime Ministers would each earn Sh1.6 million.  The Deputy Speaker would be entitled to Sh1.4 million a month, if the new perks were implemented.

The report stated the allowances, including transport, responsibility, and entertainment would be taxable. The Akiwumi Tribunal recommended the only tax-exempt allowances are those that facilitate an MP in the discharge of responsibility such as house, constituency and car maintenance allowances.

If implemented MPs would pay Sh227,861 in tax every month, which is essentially the top-up to their current consolidated monthly pay of Sh851, 000. The increment to cater for the taxation element would leave each with some Sh12,000 every month to spare.