How Treasury plots to push through harsh taxation measures

MPs are helpless in any bid to stop taxation measures sneaked in by the Executive through the Finance Bill, 2020 even after they were rejected by Parliament two weeks ago.

Even if they reject the changes that will leave Kenyans poorer, it will be a futile exercise, since President Uhuru Kenyatta will have the final say on the matter, should he send a memorandum expressing reservations.  

The changes include taxation on income from home ownership savings and from the National Social Security Fund (NSSF), monthly pension pay-outs and the dissolving of expenses including listing fees and social investment from the computation of corporate tax.

The Bill also seeks to levy tax on liquefied petroleum gas (LPG), bonuses and allowances paid to low income earners.

Last week, lawmakers rejected the changes introduced through the Tax Laws Amendment Bill, 2020.

But in an indication that the Executive is determined to push them through, they have been re-introduced through the Finance Bill tabled last Wednesday.

President’s reservations

To overturn a presidential memorandum, Parliament must raise 233 MPs, which is two thirds of the House.

The MPs have failed to raise these numbers in the past, and it will be impossible in the current scenario, where Covid-19 has locked out a majority of them from the House.

In October last year, MPs failed to stop the President from removing caps on interest rates. In 2018, they also failed to stop the President from levying eight per cent tax on fuel.

Article 115 of the constitution reads:

“Within 14 days after receipt of a Bill, the President shall assent to the Bill; or
refer the Bill back to Parliament for reconsideration by Parliament, noting any reservations that the President has concerning the Bill…Parliament, after considering the President’s reservations, may pass the Bill a second time, without amendment, or with amendments that do not fully accommodate the President’s reservations, by a vote supported by two-thirds of members of the National Assembly.”

A section of lawmakers yesterday agreed that the presidential veto is the only reason Treasury re-introduced the changes.

North Imenti MP Rahim Dawood said the Executive had decided to legislate through the backdoor and it will be difficult to block the proposed changes.

“Treasury did it because it knows the President has veto power. If we reject it, the President will send the Bill back to the House. He will invoke his powers. If it was difficult to raise numbers to overturn his wishes when the situation was normal, it is going to be more difficult now,” said the MP, also a member of the House Finance committee.

He added: “However as a House, we made it clear that revenue raising measures need to be looked at. If you are going to overtax the poor, how will it work? We had said Kenyans should not be punished through high taxes if they are re-introducing what we had rejected, we will reject it again”.

Backdoor dealings

His colleague in the Finance committee Shakeel Shabbir termed Treasury “a mafia” that does not care about the wishes of Parliament. He also warned that some people could be “misadvising the President on the proposed changes”.

“Treasury is a mafia. We reject something, and they bring it back through the backdoor. They normally try to influence members individually through inducements. Some members of the finance committee are very upset with these changes. I think someone is misadvising the President. In all possibility, if we reject the changes, the President is going to bring them back through a memorandum to the House,” said the Kisumu East lawmaker.

His Kiambu Town counterpart Jude Njomo however said the Treasury may have reintroduced the changes to create room for negotiation with MPs. “It is the same MPs who rejected the changes. So if Treasury thinks it is smart, the same MPs will reject the changes,” he said.

“However, I believe we will need to reach some kind of middle ground. Treasury may have reintroduced these changes as a bargaining tool. I think where we have reached we will have to agree,” said the MP.

The House Finance committee is expected to meet this week to consider the Bill, before it is subjected to public participation.

 “We will hear from the public on the Bill but Parliament cannot be said to be helpless on the matter,” said Vice-Chair of National Assembly Finance Committee Waihenya Ndirangu.