Kenyan MPs dip into relief fund for tax arrears

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By ALPHONCE SHIUNDU ashiundu@ke.nationmedia.com
Posted  Monday, August 29  2011 at  22:00

IN SUMMARY

• Finance Ministry agreed to a deal where lawmakers would be repaid from taxpayer funds if they agreed to pay their dues

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Kenyan MPs have raided money set aside for relief operations and other national emergencies to settle their tax arrears. The public kitty will also compensate MPs for the income they will lose once they start paying full income taxes.

The details are in the fine print of alterations to this year’s Budget by the Budget Committee of the House. The manoeuvre is meant to give the impression that MPs are finally willing to pay their taxes while disguising the fact they will be subsidised for loss of income.

The money will come from a reallocation of funds from the National Contingency Fund to the budget of the National Assembly.

Two weeks ago, the Nation reported that MPs had quietly hammered a deal with the Ministry of Finance allowing them to be compensated for agreeing to pay taxes. (READ: Secret deal struck to settle MPs’ tax)

In the raid on the Contingency Fund, the lawmakers will make away with Sh2 billion in a deal meant to mollify MPs into approving the Treasury’s proposals without severe amendments as had been recommended by the Budget Committee and approved by the House.

MPs have just today to legally adopt the Appropriations Bill, which will allow the government to access money from the Consolidated Fund and run the affairs of the country. The rules on budget-making prescribe that MPs must approve the money by August 31 every year.

Amended version

In the amended version of Kenya’s 2011-2012 Budget tabled in Parliament late last week, the MPs pushed the recurrent allocation to the National Assembly from Sh6.5 billion to Sh8.5 billion.

The Contingency Fund — money usually set aside to cater for national emergencies like floods, fires and relief — has been reduced to zero.

The lawmakers argue that the reallocation to cater for their back taxes was valid because according to the Income Tax Act, it is the role of the employer to remit tax to the Kenya Revenue Authority on behalf of the government.

They say that the failure of the Parliamentary Service Commission to do so soon after the promulgation of the Constitution in August last year, had made it culpable.

The Treasury has thus set aside Sh2.4 billion under a budget item titled “current grants to government agencies and other levels of government” to cater for the tax arrears.

The money will shield MPs from the taxman until they exit office.

The money is also going to be used to pay former MPs who served the House between 1983 and 2007 a monthly pension of Sh92,000.

The KRA had informed MPs that their total tax Bill was Sh580 million as at July this year. A similar amount is expected next year. The sum set aside as a grant is likely to cater for all their taxes.

It is understood that the Budget Committee quietly agreed with the Treasury to amend the report after it was adopted in Parliament so that the money to cover taxes on their allowances is included.

The Treasury, on its part, had agreed to reject proposals such as the one pushing for the employment of 28,000 teachers and the one for the expansion of the Rural Electrification Programme.

Reduce budget reserves

Among the changes that the Treasury made in the Budget estimates is the reduction of the Budget reserves from Sh2 billion to Sh500 million; the reduction of the money for contingencies to zero; setting aside Sh232 million to pay nurses; Sh318 million for the purchase of certified seeds; and Sh980 million for feasibility studies under the Ministry of Transport.

The Interim Independent Electoral Commission has lost Sh643 million. Only the Ministry of Foreign Affairs survived the cuts.

In today’s Order Paper, the MPs have been asked to approve under the “guillotine procedure” a total of Sh374.3 billion to the government departments.

The lawmakers had threatened to reject the Appropriations Bill if the Treasury had not included their pay in the revised estimates.

Mr John Mbadi (Gwassi, ODM), who sits in the Budget Committee, noted yesterday that the money had been provided to cater for their back taxes.