27 June 2011

Kenya: Why Raila, Musyimi Paid Sh5.4m Tax Arrears

Nairobi — Prime Minister Raila Odinga and presidential hopeful Mutava Musyimi buckled under public pressure on MPs to pay tax on their perks and remitted Sh5.4 million in tax arrears to the taxman.

The two, who have their eyes focused on next year's polls and who've also declared their interest to vie for the presidency, then went ahead to summon journalists to announce that they had complied with article 210(3) of Kenya's 10-month-old Constitution.

Mr Odinga's outstanding tax bill was Sh3.392 million, while that of Mr Musyimi, also the MP for Gachoka, was Sh1.998 million.

The duojoin MPs Peter Kenneth (Gatanga) and Johnstone Muthama (Kang'undo) as the only lawmakers who pay tax on all their income.

Mr Kenneth and Mr Muthama have been paying tax since the matter came up in 2009 and did not, like their colleagues, hide behind the laws exempting the perks of MPs from taxation.

"I have paid, because that is the law. The Constitution does not exempt anybody, let alone MPs, from paying taxes," Mr Odinga said at a press conference in his office.

"The Constitution does not distinguish salary, allowances or other benefits."

The Prime Minister, who under the law is the supervisor and coordinator of government functions, then asked President Kibaki, Vice President Kalonzo, MPs and the rest of the constitutional office holders to ensure that they pay their debts to the taxman.

"It is imperative to note that nobody is above the law. Not the President. Not the Prime Minister. Not the Vice President. Not the MPs. We must follow the same law that everyone follows. All Kenyans -- including some of the lowest paid househelps, labourers, factory workers, even vendors--pay tax," the PM said.

"Let us raise the confidence of the public in the wonder and promise of the new Constitution," he added.

Public Service Minister Dalmas Otieno accompanied the Prime Minister to his news conference at the Office of the Prime Minister, but he sat mum, and did not utter a word.

The PM failed to answer a question seeking to know if Mr Otieno was willing to comply with the KRA directive.

On his part, Mr Musyimi, who addressed a news conference at noon in Parliament buildings, said the people had decided so Parliament had to abide, because the issue was no longer governed by an Act of Parliament, but by the Constitution.

"I felt deeply constrained to put this matter to bed. It's a pity that the matter is taking too long for the discussions between Parliament and KRA to be concluded. I personally couldn't wait much longer, I had agonized over this, may be didn't say much about it, but this whole discussion has not been easy since 2008 when we came here," said Mr Musyimi.

He flashed a letter to the Clerk of the National Assembly, Mr Patrick Gichohi, saying that he had now instructed Parliament to deduct tax on his pay beginning this July.

"This is to instruct you to charge tax on all my emoluments in accordance with the law with effect from July 2011," read the one-paragraph letter copied to KRA's Commissioner General Michael Waweru.

On Monday, both the PM and Mr Musyimi alluded to talks between KRA and Parliamentary Service Commission concerning the taxation debate, but they all said it was a moral call to pay the tax.

The PM denied knowledge of the pre-referendum deal struck in July 2010 that MPs will not pay tax until after the end of the life of the 10th Parliament at the end of 2012.

"I was never in collusion with anybody to evade paying tax. I am doing what I consider to be in the best national interest of this country. I was never in any pact with anybody," Mr Odinga said.

Asked if the deal that House Speaker Kenneth Marende and the rest of the Public Service Commission had struck with the KRA, the Treasury, the Attorney General and the President was valid, the PM said that in as much as he was not aware of the deal, it was more of a "gentleman's agreement" with no legal basis.

"I am not aware of that arrangement and I don't want to contradict Mr Speaker," the PM said.

Mr Odinga said MPs are likely to suffer because the tax arrears will leave them in "very uncomfortable situation." Beginning this month, the PM said, MPs should expect the taxman to tax them.

However, he exonerated MPs saying they "had not refused to pay tax" only that the PSC did not deduct the tax on the income. He asked MPs to look at the payment of tax as an "individual matter and not a collective issue".

"MPs don't pay tax themselves. If the government (through the PSC) deducted the tax, no MP would have refused, because, tax is deducted at source. Most of the time, and this is human, people assume that what you're paid has the requisite taxes deducted.

If you find so much money in the bank account, you assume that your employer did the right thing," he said.

Other presidential hopefuls and MPs who've backed the payment of taxes are Martha Karua, Eugene Wamalwa, Kalonzo Musyoka, William Ruto, Musalia Mudavadi, only that they've all asked the KRA to engage the PSC in talks to reach a compromise. The PSC itself has vowed, on the basis from the pre-referendum agreement, not to pay any taxes.

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