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Friday, June 24, 2011

What if KRA goes ahead and taxes MPs?

The tax sword threatening the MPs’ hefty perks will dent their financial muscle significantly. They know it and that’s why they’ve vowed to fight it to the end, an end which, if indications from the Judiciary are anything to go by, might just turn out to be a bitter and a broke one.

A chat with tax experts and auditors from two multinational auditing firms –all who spoke on condition of anonymity because of internal red-tape concerning speaking to the press—revealed that all the perks, namely car maintenance, housing, extraneous duty, entertainment and constituency allowances, will be taxed at 30 per cent.

The Sh366,000 blanket mileage package that each MP gets will also face the same axe and so will the Sh3.3 million grant given to every new MP to purchase a new car.

Their sitting allowances of Sh5,000, per sitting, have also not been spared. The tax experts argue that these too will have to be cut to Sh3,500 once the taxman strikes.

It is this sitting allowance that saw MPs preen around buying lunch for their visitors at Parliament’s cafeteria. The four-course lunch at the cafeteria costs circa Sh500. Now, they’ll have to live with losing three ‘free lunches’ for their guests.

Don’t be surprised if you meet them in the average city restaurant with their retinue of hangers-on during lunch-time. When they ask for ugali-saucer (free top-up of ugali in case you’re not satisfied after eating the one you’ve paid for), don’t sneer. For the first-time, in a long-time, they’ll be getting to know how Kenyans have lunch.

Given that most of them stay in fancy neighbourhoods, in Nairobi’s suburbia like Hurlingham, Valley Arcade, Karen, Woodley, the posh places in Westlands, Riverside and Ridgeways and that many of them rent their abodes, a move to pocket-friendly neighbourhoods cannot be ruled out.

That’s because, their Sh70,000 house allowance –assuming they use all of it to pay rent-- will be sliced to Sh49,000. A nice spacious house, plus a compound, with a concrete fence topped with electric wires, and an opaque steel gate doesn’t go for Sh49,000 in rich neighbourhoods.

So when they move to apartments in these neighbourhoods, the pampered lawmakers will have to contend with the cantankerous upper middle-class, who feel the pinch every endmonth when the taxman strikes.

They will know what it means to wake up early to fetch water before the taps run dry, like every city dweller does, because, they, MPs, failed to get to the bottom of the brazen looting of water resources at the Ministry of Water and Irrigation in the infamous water scandal.

To understand how poor or how ‘negative’ some of their payslips will look like, you have to read the report of the Akiwumi tribunal that reviewed their pay.

Of the 222 MPs, 29 of them have committed their pay in mortgage and loans –most of which have to be paid within five years—to an extent that their net take-home is Sh10,000 or less. These are the kind of MPs who survive on sitting allowance and spend their day in Parliament running from one committee to another, so that they can make at least Sh10,000 a day translating to Sh50,000 a week.

In the whole of 10th Parliament, 81 MPs have a take-home of Sh100,000 or less. If the tax is imposed and backdated to August 27, 2010, many of them will be turned into paupers.

When they call news conferences and protest about the directive to have their perks taxed; and even go ahead to issue threats about disbanding the Kenya Revenue Authority –by repealing the KRA Act—then you begin to understand why their zeal is that brawny.

But it is their lopsided, corrupt and short-sighted brand of politics that has in the first place got the country in such a mess, that every coin has become so important, including that which is stolen like the donor money meant for free primary education.

The argument, according to the tax experts and auditors, is if in the first place the MPs paid tax on all their income, they’ll understand the pinch of seeing their money stolen in the multi-billion scandals that have rocked the country since the botched 2007 elections.

They will understand that instead of forming superfluous ad-hoc committees like the one on Cost of Living –to go around the country pretending that they are collecting view, when in fact their real motive is to pocket thousands of shillings in allowances and mileage claims—is less important than making and implementing policies to ensure food security.

With a looming cut of their Sh75,000 monthly car maintenance allowance, the MPs are likely to ditch their top-of-the-range fuel guzzlers in favour of economical vehicles. Some are likely to go for taxis, while others will just east humble pie and hop into matatus –after all, at least half-a-dozen first-time MPs walked to Parliament that January afternoon in 2008 when they first took their oath of office.

Beginning 2013, the Sh3.3 million grant will be Sh2.31 million after tax. And given the article in the Constitution outlawing waivers or tax exemptions for MPs and constitutional office holders, then, they will forget about the top-of-the-range sports utility vehicles, many of which were sold to them tax-free.

After the noise levels go down, the MPs will understand that this is a new dawn. Judges are being vetted afresh. The Chief Justice and the Attorney General are being replaced. So, they too, have a duty to respect the Constitution. A lot changed since August 27, 2010 when the Constitution was promulgated.

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