How MPs plot to avoid tax on pay ? In2EastAfrica ? All East ...

Some of the Members of Paliament after attending the Speaker's Kamukunji, at Parliament Buildings, Nairobi, Thursday. They formed a 15-member committee to renegotiate taxation of their salaries. PHOTO: JENIPHER WACHIE/STANDARD

Members of Parliament rejected an ultimatum by Kenya Revenue Authority, reprimanded Vice-President Kalonzo Musyoka for bowing to taxman?s pressure, and formed a committee to renegotiate tax on their incomes.

But they also shoved their secret trump card onto the table: A threat to the Government to let them have their way or they shoot down the 2011-2012 Budget, thereby precipitating unprecedented governance and financial crisis. It also emerged the MPs were least concerned tax payment is now a condition for clearance to run for senior public offices, a fact demonstrated in the recent advertisements for judicial jobs as well as positions in the Independent Election and Boundaries Commission.

Apart from the threat to paralyse Government, the MPs let out the message they were unwilling to pay up despite the example set by, among others, the President, the Prime Minister, and the Vice-President. Instead, they formed a 15-member ad hoc committee to negotiate with the Executive.

The 15-man committee comprises of Deputy Prime Minister and Minister for Finance Uhuru Kenyatta, Cabinet ministers John Michuki, Naomi Shaaban, James Orengo and Dalmas Otieno. Others are Assistant Ministers Margaret Kamar, Joseph Nkaissery and David Musila, Government Chief Whip Jakoyo Midiwo, and three MPs who will represent backbenchers namely Isaac Ruto, Rachael Shebesh, and Kiema Kilonzo.

All this took place at the Speaker?s Kamukunji (informal meeting) Thursday, during which the members criticised those who have paid up their taxes in line with the provisions of the Constitution. The MPs also berated their colleagues, who were paying tax even before the new Constitution made it mandatory.

Kibaki, Raila and Kalonzo, too, were not spared, more so the VP because in his position as Leader of Government Business in the House, he represents the interests of the Government.

It is expected the committee would skirt around Article 210, compelling State officers to pay tax. Experts argue that the National Assembly Renumeration Act, which exempted MPs from paying taxes on allowances, was neutralised by Article 210.

Plan to fight

MPs plan to fight this legal requirement with the Bill of Rights, which they argue would be violated if their incomes were reduced. They also argue International Labour Organisation regulations outlaw salary review downwards.

The Financial Bill must be passed by the end of this month, according to timelines under the new Constitution. Without it the Government cannot raise revenue through taxation.

The ad hoc committee that brings together six Cabinet ministers, four assistant ministers and six backbenchers is expected to come up with recommendations that include formulation of three pieces of legislations that would resolve the tax row.

The MPs threatened to vote out the Finance Bill and accused the President and the Prime Minister of betrayal.

After three-hour stormy deliberations, the MPs were categorical they would not comply with KRA?s 30-day ultimatum given on August 3.

The MPs were hostile to their colleagues who pay tax, terming them traitors.

Sources in the meeting told The Standard the MPs trashed the pre-Constitution referendum ?gentleman?s agreement between the Executive and legislators whose pillar was the taxation law would apply to the next Parliament.

Yesterday the members argued this agreement had been overtaken by events.

Over-taxed

?That letter from Attorney General (interpreting the current MPs would not be affected by the new tax provisions) is void. We are not going to dwell on that because it cannot help us now,? said Midiwo, when briefing the Press at Parliament Buildings.

Early this month, KRA wrote to the Clerk of the National Assembly demanding MPs settle their tax arrears within 30 days or face penalties.

Midiwo who was accompanied by Johnstone Muthama, the joint chief whip, told journalists that the committee would negotiate with the President and the Prime Minister for a middle-ground on their tax arrears.

?The tax issue has been trivialised. MPs are not against paying taxes on their allowances, but we have realised that this matter affects not only us but also the allowances of the military and judicial officers,? explained Midiwo.

But the MPs? move to form the committee to negotiate on the issues gives a different account on their willingness to pay tax. It remained clear after the Kamukunji most MPs were not keen on paying taxes on their allowances.

Midiwo said the committee would not only tackle MPs? taxes, but also deal with the issues conclusively.

?I am a member of the Finance Committee and we have recommended a comprehensive tax law to address the current tax issues, but the Ministry of Finance has not been keen,? said Midiwo.

He said some Kenyans were being over-taxed while many in the middle and lower income brackets were not paying tax. ?We require a Bill to address issues on Value Added Tax, Income Tax, and Corporation taxes. The Executive must come up with this Bill,? said Midiwo.

Heckled

Muthama, who paid his taxes long before the law came into force, and who came under fire from MPs over his previous remarks on MPs? taxation, argued there was need for the Executive to come up with legislations that deal with the tax matters.

?The Government must come up with at least three legislations to deal with taxation. The law must be in line with the Constitution,? said Muthama.

Hostile MPs reportedly heckled Kalonzo and threatened to vote out the Finance Bill.

The MPs also accused the President and the PM of betrayal. They claimed the three had rejected the legal opinion of Attorney General Amos Wako.

The AG had advised the current Parliament elected under the old Constitution would be exempt from taxation under the new Constitution.

MPs accused Raila and Kalonzo of political populism for agreeing to return enhanced taxes to KRA.

Speaker Kenneth Marende reportedly supported Muthama, arguing he ?has repented? and is now on the MPs? side. Muthama later told journalists ?MPs even wanted to de-whip me?.

?There was no opposition to the point of view that this Parliament shall not be subjected to any taxation outside the requirements of Income Tax and ILO regulations,? said one MP.

?We are ready to vote out the Finance Bill and that will trigger a paralysis of Government and even dissolution of the House,? said the legislator who disclosed that Muthama and the VP are the only MPs who supported the tax demands at the meeting.

When Kalonzo entered the meeting, MPs questioned why ?he had come to mock us? but he reportedly said, ?I was forced to pay tax. I was under pressure from the public and civil society.?

By David Ochami and Steve Mkawale, The Standard

Source: http://in2eastafrica.net/how-mps-plot-to-avoid-tax-on-pay/

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