logo
ADVERTISEMENT

Ruto’s strategy to push through controversial tax laws

The President asks his troops in Parliament to pass Finance Bill, 2023

image
by The Star

News24 May 2023 - 16:33
ADVERTISEMENT

In Summary


  • President William Ruto has rolled out an elaborate strategy to push through the controversial tax Bill despite a ferocious public uproar.
  • The head of state has whipped his troops in parliament to pass the Finance Bill, 2023 that contains the taxes and is currently before the House.
EALA MP Kanini Kega attends the Kenya Kwanza Parliamentary Group meeting at State House on May 23, 2023.
Bold decisions need to be made and bold actions need to be taken and great achievements are always a product of such bold decisions and actions

President William Ruto has rolled out an elaborate strategy in his resolve to push through the Finance Bill 2023 despite increasing opposition.

To get his MPs to pass the Bill, Ruto has engaged government technocrats to break down the proposals and “demystify” the grey areas.

He has also launched a media campaign, granting the technocrats use of the presidential media team to sell the tax agenda as he personally takes to the public podium to make a case for the levies.

Lawmakers, including Kenya Kwanza troops, are under pressure from their constituents to reject the Bill which critics warn will further burden struggling Kenyans.

On Wednesday, Housing Principal Secretary Charles Hinga and State House Spokesman Hussein Mohamed jointly addressed the media and strongly rooted for the Housing Levy Fund.

Hinga told Kenyans that their contributions would be safe under an independent administrator as part of measures to enhance governance.

For the first time, the government announced that the deduction would be capped at a maximum of Sh2,500 monthly with an exit provision in the seventh year.

“If one earns Sh30,000 a month, for example, they will contribute Sh900 to the fund as the employer remits a similar amount,” Hussein said.

He said in the President’s view, Kenyans cannot continue burying their head in the sand, as all indications are that the future is urban.

“Bold decisions need to be made and bold actions need to be taken and great achievements are always a product of such bold decisions and actions,” Hussein said.

“The President emphasises the importance of people’s active participation in his transformative journey.”

He said the initiative did not emerge without planning. “It was articulated and outlined in the manifesto, the foundational document on which the President was elected by the Kenyan people,” he said.

The press briefing came just a day after Ruto chaired a Kenya Kwanza Parliamentary Group meeting where MPs were taken through the entire Bill.

In a departure from the norm, Ruto roped in his Cabinet Secretaries and Principal Secretaries to break down the proposed taxes for the lawmakers.

The Star has established that ICT CS Eliud Owalo and his Environment counterpart Soipan Tuya and Education’s Ezekiel Machogu are among the CSs who attended the PG meeting held at State House.

Hinga and Treasury PS Chris Kiptoo also attended the meeting and took the MPs through the Bill.


The proposed taxes have raised a storm with the opposition, trade unions, employers, employees and other players terming them as exploitative.

Multiple lawmakers who spoke to the Star confirmed being taken through the Bill. They also discussed the government’s agenda to combat climate change as well as the plan to set up digital hubs to tap into digital jobs.

“It’s true. We were taken through the Bill and we understood. In fact, despite all that has been out there, I understood that Kenyans will pay a maximum of Sh2,500 for house levy fund despite the salary they earn,” a Senator who attended the meeting told the Star.

“CS Tuya talked to us about the forest cover and how the government intends to achieve it.”

The proposed taxes have raised a storm with the opposition, trade unions, employers, employees and other players terming them as exploitative.

Opposition chief Raila Odinga has already instructed his allies in Parliament to reject the Bill, setting the stage for a confrontation after the MPs resume sittings from recess on June 4.

Ruto’s Kenya Kwanza enjoys a near absolute majority in the National Assembly.

However, some of his troops have publicly promised their constituents they would shoot down the proposals.

In the past, Ruto has whipped his allies to pass controversial Bills despite opposition by Azimio.

Among the controversial Bills the lawmakers have approved is the IEBC Act, which changed the composition of the selection panel.

The Finance Bill is undergoing public participation hearings by the National Assembly’s Finance and Planning Committee.

Law Society of Kenya, Kenya Association of Manufacturers, Federation of Kenya Employers, Civil Servants’ unions, Kenya Private Sector Alliance and Institute of Economic Affairs have so far appeared before the committee and expressed their reservations.

The proposed law, among others, increases the National Hospital Insurance Fund and National Social Security Fund contribution, especially for high earners.

It also proposes to raise income tax from the current 30 per cent to 35 per cent for those earning Sh500, 000 and above.

The Bill also increases VAT on petroleum products from the current eight percent to 16 percent.

But the President has maintained that the taxes are in-line with his Bottom-Up agenda and campaign manifesto aimed at growing the economy while cutting on borrowing.

As unions, we condemn in the strongest terms the heartless, insensitive, and cavalier manner in which the government is proposing to impose a housing levy without any commensurate increment in workers’ emoluments

In several public engagements, including media interviews, Ruto has taken a lot of time to explain the rationale for the taxes, stating that levies will help his administration implement his agenda in the wake of huge public debt.

In their presentation on Wednesday, the Kenya Association of Manufacturers warned that the taxes could expose Kenya to cheap imports from neighbouring countries.

KAM argued that the taxes would push up the cost of various commodities in Kenya way above regional markets.

Food and beverage sector, metal, pharmaceutical, paper and paperboard and cement sub-sectors will be most impacted.

Kenya Private Sector Alliance opposed the increase of VAT on fuel from eight to 16 percent saying this will worsen an already bad economic situation.

“The increase of eight percent will lead to a corresponding increase in the cost of fuel by Sh12.56 and Sh12.76 per litre of diesel and petrol respectively on the current Nairobi pump price,” Kepsa said in its memorandum.

The group also opposed the export and investment promotion levies, which it argues, put Kenya at a disadvantage as a preferred investment location within EAC and Comesa.

Kepsa equally rejected the introduction of the mandatory housing levy, adding that contributions should be voluntary.

“Our proposal is to implement a voluntary contribution system starting in January 2024 with employers matching. This approach avoids any challenge to private property rights and ensures constitutionality,” Kepsa stated.

Law Society of Kenya has also rejected the levy, instead proposing that the contributions be reduced to one percent of the pay and made voluntary.

Kenya National Union of Teachers, Kenya Universities Staff Union and Universities Academic Staff Union are among the unions opposed to the Bill.

Others are the Kenya Medical Practitioners and Dentists' Union, and Kenya Union Of Domestic Hotels Educational Institutions Hospitals and Allied Workers.

“As unions, we condemn in the strongest terms the heartless, insensitive, and cavalier manner in which the government is proposing to impose a housing levy without any commensurate increment in workers’ emoluments,” Kusu secretary general Charles Mukhwaya said.

“We demand the immediate reversal of the levy.” 

The Federation of Kenya Employers has warned of massive job losses if the proposed taxes are approved by Parliament and implemented by the executive.

“At this point, the federation finds it difficult to support the housing levy as proposed. Our members are complaining it is coming on the heels of very many other proposals that constitute taxes to us,” FKE Executive Director Jacqueline Mugo said two weeks ago.

ADVERTISEMENT

logo© The Star 2024. All rights reserved