The Parliamentary Service Commission will this Thursday decide whether or not to end the stalemate with the Kenya Revenue Authority over its decision to tax MPs’ allowances. Kenneth Marende has summoned the MPs to a Speaker’s Kamukunji at Parliament Buildings where the final decision will be made.
The Kamukunji follows a meeting between Marende, Prime Minister Raila Odinga and Deputy Prime Minister and Minister of Finance Uhuru Kenyatta last Thursday. The KRA insists it will collect taxes due from the MPs and has given them 30 days to offset their arrears or the taxman will attach their property and salaries.
The MPs on the other hand claim they were excluded from paying taxes by the transitional clauses of the new constitution. They claim the clauses as well the two principals, President Kibaki and PM Raila, had indicated that the requirement that they pay taxes would only apply to the next Parliament and not the current one.
The MPs claim the KRA had gone back on an understanding that had been reached between the two principals which would have exempted the current Parliament from paying tax. "There is a sudden urgency to resolve the issue from the government side. We stated our stand on the matter in a letter sent to KRA by the Clerk last month. We still stand by it," said a member of Parliamentary Service Commission.
The letter sent to KRA by National Assembly Clerk Patrick Gichohi said in part: "It is the position of the Parliamentary Service Commission that no monies are due and owing from it to KRA in taxes, penalties, interests or otherwise. The PSC therefore requests KRA to withdraw its demand for additional taxes which is illegal and unconstitutional. It is the further position of PSC that the status quo should hold until the end of the 10th Parliament."
Gichohi’s letter followed a meeting held on July 20 between KRA and Parliament at the Speaker’s office in Parliament. The KRA was represented by Waweru, Domestic Tax Commissioner John Njiraini while Parliament was represented by Marende, the Finance Committee chairman Chris Okemo, PSC vice-chairman Walter Nyambati and Gichohi. In the meeting the Parliament side tabled a letter from KRA and the Finance ministry assuring MPs that they would not pay taxes when the new constitution comes into effect. They also tabled a similar letter from Attorney General Amos Wako.
Parliament argued that according to article 210(1) of the constitution you cannot tax someone without legislation and that the new constitution preserves the current Parliament with all its privileges. The KRA team told the parliamentarians that the demand for additional taxes was occasioned by the Commission for Implementation of the Constitution and that AG Amos Wako’s letter can be challenged in court.
The KRA advised that Parliament should present an objection letter so that the matter can be negotiated or go to the Arbitration Court. It was after this that Gichohi wrote the letter to KRA.
The decision to hold the Kamukunji has been provoked by concerns within the executive that MPs might use the issue to delay the passage of about 10 crucial Bills related to the implementation of the constitution, the management of elections and others whose time was fast running out.
Sources in government said there were growing concerns that Parliament might hold these Bills hostage unless this matter is resolved quickly. If the MPs decide to hold onto their position not to pay tax, the taxman will be at liberty — as per the new constitution — to use all legal means within his disposal to recover the tax and arrears owed. Some Cabinet ministers and MPs have already paid their taxes while majority of them are holding out waiting for the outcome of Thursday’s meeting. While many of them say they are willing to pay taxes, they accuse the KRA of ‘duping’ them and catching them unawares.
Members currently earn an average of Sh850,000 but only pay tax on Sh200,000. Most of the money they earn comprises allowances which were not taxed under the old constitution.
Last month, the KRA deducted close to 30 per cent tax on allowances paid to Cabinet ministers and their assistants catching many of them by surprise. Previously ministers and their assistants used to pay only Sh63,932,40. The taxman has now computed all their ministerial allowances plus their basic salaries and deducted an average Sh164,782.20 as Pay As You Earn (PAYE).
Immigration minister Otieno Kajwang’ while objecting to the ‘sudden raid’ on the salaries and allowances of Cabinet ministers and their assistants, suggested that the KRA should reach a compromise and work out a repayment plan which would not penalise them MPs. The action by the taxman followed instructions issued by the Head of Public Service and Secretary to the Cabinet Francis Muthaura to all Permanent Secretaries asking them to take up to 30 per cent of the Sh200,000 which is the basic salary paid to ministers and their assistants.
Source- http://www.nairobistar.com/national/national/35224-kra-faces-off-with-mps-over-taxes
