Pay up or go to court, taxman tells defiant MPs

The taxman Thursday insisted Parliament should pay taxes or head straight to court after an informal meeting of MPs resolved to form a 15-member team to resolve the matter, but opted to ignore a 30-day ultimatum to pay taxes.

The committee expected to engage the taxman is expected to report to Parliament in a week.

Kenya Revenue Authority had on Wednesday met the Parliamentary Service Commission (PSC) and agreed that it seeks MPs’ concurrence on the next course of action.

On Thursday, officials at the authority were taken aback after the defiant announcement came from the Speaker’s Kamukunji, an informal gathering of MPs chaired by the Speaker who also doubles as the PSC chairman.

The 15-member team formed on Thursday is made up backbenchers, assistant ministers and ministers. Ministers and assistant ministers have began paying their dues after head of Civil Service Francis Muthaura directed them to do so.

“I do not think they have any other option than to go court,” said KRA large taxpayer office commissioner John Njiraini. “They should just give their employer authority to go to court.”

He noted that after the Wednesday meeting, the PSC appeared resigned to meeting their tax obligations as dictated by the Constitution. House sources confirmed the deductions from July although the arrears estimated at about Sh600 million were yet to be settled.

Tax experts though think that the MPs risk losing most in the stalemate, hence the decision to involve them in a tussle on the face of it concerning their employer, the PSC.

“Basically KRA is telling them talk to your employer so that you can get a certificate of compliance ahead of elections. Some are already paying because it is a personal matter,” said Mr Francis Kamau, a tax expert at Ernst & Young.

On August 3, 2011, KRA wrote to the clerk of the National Assembly, Mr Patrick Gichohi, demanding that members pay the taxes and arrears in 30 days—after PSC rejected a KRA tax assessment. That deadline lapses in the first weekend of September as KRA uses calendar days in its calculations.

However, Mr Kamau says the taxman normally gives another 14-day notice followed by a week’s extension after which an agency notice is issued. The notice normally issued to the employer, in this case PSC, goes to the Central Bank where salaries are attached.

On Thursday chief whip Johnstone Muthama suggested implementation of the Akiwumi Report to increase MPs pay and cover the tax demand could be the way out for PSC.

“If you pay the principal amount the better for you because you can negotiate the interest and penalty waivers,” he said. It is not clear whether MPs can use the Income Tax Act provisions, which allow them to go to a Local Tribunal to resolve the matter.

Mr Njiraini says as the matter is of a constitutional nature, the dispute resolution mechanism would have to be the Supreme Court presided over by Chief Justice Willy Mutunga.

MPs have been arguing that the Legislature is ‘saved’ under the schedules of the Constitution. The relevant part says: “The National Assembly existing immediately before the effective date shall continue as the National Assembly for the purposes of this constitution for its unexpired term.” However, the assertion appeared to fall flat on its face after they pushed Finance minister Uhuru Kenyatta to comply with the provisions of the same on Budget presentation. The schedule saves both the Executive and legislature.