• The MPs declined to give Treasury powers to consider a personal house an investment, meaning raising capital gains tax.
• They want the law changed to bar employers from deducting workers' salaries during the virus crisis period.
MPs on Wednesday rejected the government’s bid to raise taxes to increase funding to fight Covid-19.
The lawmakers saved citizens from higher prices on bread, milk, flour and other foodstuff that the Treasury wanted to tax.
The Tax Laws (Amendment) Bill, 2020 sought to move elements of producing ordinary bread to tax-exempt from the zero rate regime.
“Bread is an essential commodity and any attempt to increase its price will make it costly for most Kenyans,” the Finance Committee of the National Assembly said.
In its report to the House, the Finance Committee chaired by Kipkelion East MP Joseph Limo also saved farmers from costly fertilisers.
Fishermen also got a respite in the reasoning that taxes on nets would discourage the growth of the industry and make fish more expensive.
The legislators further want exemptions from payment of turnover tax – Uzalendo, to extend to businesses earning less than Sh1 million.
Members said this will put more money in the pockets of enterprises even as they rejected the proposal to tax mosquito nets.
Treasury’s intention to tax equipment used in making clean energy stoves has equally been rejected as discouraging investment in green energy.
Limo’s committee has further resolved that taxing any income from capital expenditure will discourage foreign direct investment.
They further reasoned that taxing contractors building schools and other amenities for public use will discourage the development of social infrastructure.
MPs said taxing mortgages will discourage savings for investments in the housing sector, which contradicts the Big Four agenda.
Treasury was also denied the chance to raise money from taxes on interest earned from Post Bank savings.
“The bank caters for small income earners, especially in the remote parts of the country. Post Bank does not offer credit services, hence has a small profit margin.”
MPs declined to give Treasury powers to consider a personal house as an investment worth raising capital gains tax.
“It will be unfair. In Kenya, most families inherit land as opposed to purchase,” the report reads.
NSSF members will also get a reprieve on the proposed tax on investments as well as tax on pension payout to retirees.
“Proposal to tax the payouts would erode earnings to be received by retirees which will in turn discourage the saving culture.”
The committee reasoned that removal of exemption on Kenyan bonds will make them less attractive to foreign investors.
“The proposed tax on green bond came too early since the bond came to effect in January and only one has been issued so far.
“We need to give more time to allow a critical mass of investors leverage this exemption before tax is imposed,” the MPs concluded.
They agreed with President Uhuru Kenyatta’s proposal to reduce corporate tax by five per cent.
They deleted the amendments affecting aviation sector, saying it is among those hardest hit by the Covid-19 pandemic.
“They need a chance to recover before they are subjected to such new taxes,” Limo’s report, which has also deleted amendment listing aeroplane tyres, reads.
On fishing equipment, the committee concluded that taxing the materials would discourage the growth of the industry and make fish more expensive.
The lawmakers also cushioned the hotel industry from imminent tax on their investments, saying they need time to recover the losses.
They want employers barred from deducting workers' salaries following the Covid-19 pandemic.
They want the Employment Act amended to stop employers from not only enforcing cuts but also terminating workers’ contracts and for employers to instead ask workers to take leave of absence without pay.
They further want contractors shielded from costs that may arise from delayed works.
Where the pandemic has affected the performance contractual obligations, MPs want termination of the lease in connection with non-payment of rent prohibited.
Creditors are also barred from repossessing any goods used for the purposes of a trade, business or profession.
The lawmakers want the KRA Act, 1995 amended to have tax evasion whistleblowers paid Sh5 million instead of Sh2 million.
The Finance committee further wants saccos barred from listing in the Credit Reference Bureau members who default on loan obligations.
They also want the Banking Act changed to allow for renegotiation of loan repayment terms between lenders and borrowers.
Edited by R.Wamochie