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Saturday, October 29, 2011

Ministers handed tax shocker in October pay



By Isaac Ongiri
A storm has erupted in Government over Head of Civil Service Francis Muthaura’s fresh order to accounting officers to continue executing tax deductions on allowances of members of the Cabinet and assistant ministers despite an initial agreement that the tax be waived.
Ministers have suffered deductions on all their ministerial allowances of Sh150,000, house allowance Sh120,000, and domestic servant allowances 75,000, while assistant ministers have been taxed on their Sh100,000 ministerial allowances, 80,000 house allowance, and Sh55, 000 domestic servant allowance in their October salaries. And The Standard On Saturday established the Kenya Revenue Authority’s domestic tax department has continued to compute tax areas for all the 200 MPs who are still battling to oppose taxation.
The taxman had previously threatened to recover the money by auctioning their assets after the dissolution of Parliament later next year. At the end of October most MPs will have accumulative tax arrears of about Sh2.5 million computed from September, last year. By the same period next year the arrears would have hit Sh4 million.
Tax evaders
"Not paying tax is an offence and we will be forwarding the names of non-compliant MPs to the Independent Electoral and Boundaries Commission next year so that these people can be treated as tax evaders," said a top KRA official, who can’t be quoted due to the sensitivity of the matter.
The IEBC may find a tax incompliant person in breach of Chapter Six of the Constitution or in deficit of integrity standards if a proposed new electoral code of conduct proposed by the outgoing IIEC is adopted. Such individuals may be declared unfit to hold public office.
Serious deductions
Some ministers and assistant ministers are now complaining about Muthaura’s order, arguing that it goes against the spirit of negotiations that had been initiated to settle the tax dispute. With the order, a tax truce entered after a negotiation called by the Speaker Kenneth Marende in early August has now collapsed.
The new tax order, communicated through a circular to Permanent Secretaries early October, came just days after the ministers started getting tax refunds as agreed previously. It was not immediately clear why Muthaura changed his mind over tax issues even after a consultative meeting agreed to suspend taxation for MPs. In implementing the new order Permanent Secretaries have taxed ministers and assistant ministers’ ministerial, house and domestic servant allowances previously spared.
"People are wondering why deductions have been made to their salaries. We had a committee that was set up to look at this matter and no response has been given to us," said Assistant Minister Katoo ole Metito. Metito said several ministers and assistant ministers had received the October pay slips showing "serious" deductions on their salaries.
Cabinet ministers had picked Public Service Minister Dalmas Otieno to lead a team of four in negotiating the tax issue. Assistant ministers had picked David Musila to represent them in the negotiations.
"In fact Musila was equally shocked when he saw his pay slip with heavy deductions indicated despite the inconclusiveness of the talks on this matter," Metito said.
No details
In August the MPs formed a committee, which was to be chaired by Otieno and whose other members were Cabinet Ministers Naomi Shaaban, James Orengo, John Michuki, and assistant ministers Musila, Joseph Nkaissery, and MPs Jakoyo Midiwo, Rachael Shebesh, and Kiema Kilonzo. One PS, who received Muthaura’s memo, said the communication did not give details on the change of mind. Assistant Minister Kareke Mbiuki confirmed that only last month he received tax refunds in cash from his ministry, which had been deducted in July.
"It is true I have received all my refunds, which had been previously chopped off. I got the refunds in cash so they were not communicated through the pay slip," said Mbiuki.
Assistant Minister Orwa Ojode, however, said that though he was yet to be refunded the previous deductions he had noticed peculiar deductions in his October salary.
"I am shocked about the massive deductions on my salary for October. I am yet to be told for what reason the deductions have been made, but I have noticed something strange," Ojode said.
Legal advice
Attorney General Githu Muigai, whose office previously wrote to Parliament giving legal advice on the tax issue before the August 2008 referendum, said he was not in the picture of the new tax orders. "My office is not seized of the ongoing deductions. Probably those are issues not under the attention of the chamber at the moment," Githu said.
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