MPs convene to reverse Covid-19 tax relief

MPs convene this morning to consider a law that seeks to reverse tax cuts introduced to cushion Kenyans from the economic ravages of Covid-19.

The lawmakers are set to discuss the Tax Laws (Amendment) Bill, 2020 from the first reading to the last stage of law making so as to pave way for its passage during the special sitting.

The Bill seeks to reverse income tax rate (Pay as You Earn) to 30 per cent from the current 25 per cent while Value Added Tax will revert to 16 per cent from the current 14 per cent.

“The principal object of the Bill is to amend the Third Schedule to the Income Tax Act, Cap. 470 to reverse income taxes, specifically Pay As You Earn and Corporation Tax to the rates that existed before the enactment of the Tax Laws (Amendment) Bill, 2020 (pre-Covid.),” states the Bill.

“Further the Bill seeks to amend the Income Tax Act by amending the top tax rate for Pay As you Earn and Corporation Tax from the current 25 per cent to 30 per cent,” it adds.

National Treasury has since announced plans to end the tax cuts –introduced in April – at the beginning of next year in a move that is set to hurt pockets of many Kenyans still struggling under the effects of the pandemic.

The Bill is sponsored by Finance and National Planning Committee Chairperson Gladys Wanga.

Yesterday, Wanga described the decision to revert to the old tax rates as a delicate balancing act informed by the falling revenue and the need to finance government services and projects.

“As a committee we have looked at the proposals and done a report that we will table in the House for debate. We are reverting to the old taxes, and I must admit that it is a tough balancing act,” said Wanga.

 Wanga said that some of the cuts like on VAT have resulted into a decline in revenue but have not impacted on the common mwananchi as intended.

She further said that the decision was informed by the lifting of some of the restrictions that were put in place when the pandemic broke up in the country.

“When the cuts were introduced, businesses were closed, there was lockdown in Nairobi, bars were closed. The restrictions resulted into a big hit on business,” said Wanga.

“While the pandemic is still on, the restrictions have been eased. At the same time, we have been able to evaluate the impact of some of the reliefs like the reduction on the VAT; there has not been trickle-down effect to the common mwananchi. That’s is why we support the proposals,” she added.

Treasury Cabinet Secretary Ukur Yatani had in a statement said the decision to return the taxes to their pre-Covid level was informed by the loss of revenue, with the Government having to forego Sh65 billion in the period when Kenyans enjoyed the tax reliefs.

The House will also debate The Judicial Service (Amendment) Bill, 2020 that seeks to allow the Judicial Service Commission (JSC) to commence recruitment of a new Chief Justice at least six months before the expected retirement date.

Currently, the recruitment starts after the retirement of the Chief Justice.

Also to be tabled for first reading is the Constitution of Kenya (Amendment Bill, 2020 by the Constitution Implementation Oversight Committee (CIOC) chaired by MP Jeremiah Kioni.

The Bill seeks to amend the constitution to allow the President appoint Cabinet Secretaries from among Members of Parliament.

 It further seeks to empower the President to assign the Attorney-General the duties of a Cabinet Secretary.

The Bill further seeks to amend Article 179 of the Constitution to allow a county governor to appoint members of the county assembly as members of his or her county executive committee.

Some of the proposals in the Bill are contained in the proposals by the Building Bridges Initiative, which is currently before the Independent Electoral and Boundaries Commission (IEBC) for signature verification.

Also expected to be debated in the two sittings that will start at 10am and another in the afternoon from 2pm include The Anti-Doping (Amendment) Bill, 2020.

During the sitting, the MPs will be expected to vote on the motions for approval of the Treaty on the Avoidance of Double Taxation between the Government of the Republic of Kenya and the Government of the Republic of Mauritius.

It will also seek to approve the Treaty on Accession to the African Charter on Democracy, Elections and Governance.