Kenyans on Thursday heaved a sigh of relief after MPs rejected tax proposals that would have seen financial institutions impose a 0.05 per cent tax on bank transactions above Sh500,000.
Members of the National Assembly
voted to throw away the excise duty tax-popularly known as the Robin Hood, as proposed by Treasury CS Henry Rotich in the
Finance Bill, 2018.
The net effect of the rejection of the tax proposal means that Kenyans will now continue transacting money above the limit without fear of any additional costs, dealing a blow to the government's revenue projections.
The Robin Hood tax was part of the revenue-raising measures Treasury put forward to fund the ambitious 2018/19 budget estimates tabled on June 4.
Had the lawmakers endorsed the amendments, 0.05 per cent tax on cash transfers above Sh500,000 would have been applied to money transferred from one account to another either within the same bank or between different banks.
The tax would also be applicable to money transferred between individuals through cash transfer agencies or other financial service providers.
According to Rotich's tax
proposals, tax remissions and refunds from the Kenya Revenue Authority, transfers from KRA’s collection accounts to Central Bank as well as transfers by or to the national government, county governments and CBK were exempted from excise duty.
High Court Judge Wilfrida Okwany had however suspended implementation of the Robin Hood tax after the Kenya Bankers Association moved to court
arguing that the “bank transfer" fee was vague as it had not been defined properly by the Treasury.
At the same time, attempts by Kiambu Town MP Jude Njomo to introduce amendments on the floor of the House to the Finance bill to compel banks and other financial institutions reserve at least 10 per cent their loan portfolio for lending to small and medium enterprises were thwarted.
Minority Leader John Mbadi, while opposing the amendment, said the move would jeopardise efforts to strengthen the economy.
“We don’t want to send a wrong signal to the economy that we are a country of regulations. I oppose this amendment,” Mbadi said.
But legislators Millie Odhiambo (Suba North), Gladys Wanga (Homa Bay) and John Walukhe (Sirisia) backed Njomo, saying that the move would empower the SMEs and precipitate the country’s economic growth.
“We must also have a human face in this Parliament. It is in our own interests as legislators to defend our small and medium enterprises and the youths of this country," said Millie.
Minority Whip Junet Mohamed (Suna East) and his Funyula counterpart Oundo Mudenyo backed Mbadi, arguing that the amendment would stifle the banking sector.
Mudenyo said the amendments ought to have had clear policies on lending securities.
“I beseech my friend Njomo to either redraft or withdraw the amendment. The problem is not about availability of funds to the SMEs but the collaterals. We can deal with the issue of SMEs without stifling the banks,” Mudenyo said.
Owing to the pressure-Njomo who is the architect of the bank interest cap-
withdrew the amendment.
The enactment of the Finance Bill, 2018 by the National Assembly now means that it awaits President Uhuru Kenyatta’s assent before taking effect.