The National Treasury’s bid to raise more revenue suffered yet another blow when MPs rejected the introduction of new legislation targeting bank transfers.
The MPs said yesterday allowing Treasury to tax 0.05 per cent on bank transfers above Sh500,000 would open the door for Government to tax employees' salaries.
Kiminini MP Chris Wamalwa led the onslaught against the tax, saying it would affect the transfer of bursaries extended to students through the Constituency Development Fund.
“If passed, it will open a Pandora ’s Box and tomorrow they will start taxing the salaries you send to CDF employees,” said Mr Wamalwa.
The rejection of the tax follows Tuesday's decision by MPs to amend the Finance Bill 2018 and suspend implementation of a 16 per cent value-added tax on petroleum products that was slated to start on September 1.
Treasury Cabinet Secretary Henry Rotich announced the excise duty in his Budget speech to the National Assembly on June 14, saying the Government would collect sizeable revenue from the new tax.
“For the Government to get a fair share of revenue from these financial activities and to finance critical programmes, I propose to introduce a Robin Hood tax of 0.05 per cent of any amount of Sh500,000 or more transferred through banks or other financial institutions,” Mr Rotich told MPs in June.
The legislators did not however amend Rotich’s proposal that pushed up the excise duty on mobile money transfer charges from ten per cent to 12 per cent.
The CS had said that money raised from these two taxes would go towards financing universal health coverage, which forms one pillar of President Uhuru Kenyatta’s Big Four development agenda.
The MPs further rejected a proposal by Kiambu Town MP Jude Njomo to increase the minimum capital requirement for starting a commercial bank or mortgage finance company from the current Sh1 billion to Sh5 billion.
The Finance Bill sought to have banks increase their capital base gradually over the next three years, with a requirement to have at least Sh2 billion by December 2019.
Mr Njomo had argued that increasing the banks' core capital would shield them from collapse.
But MPs Charles Kilonzo (Yatta), Omboko Milemba (Emuhaya) and Wamalwa alleged the amendment was intended to protect established financial institutions from new competitors.
“This House should not be used to protect cartels. I thought Jude Njomo was fighting for the small people; today he has failed by supporting the big people,” said Mr Kilonzo.
Mr Milemba said the collapse of banks had nothing to do with the size of their capital base, adding that passing the law would block people from venturing into the banking business.
“If our predecessors passed these kinds of legislations, banks like Equity would not be in place,” he said.
The MPs also rejected a proposal to reduce the amount of betting and lottery tax payable from the current 35 per cent to 15 per cent.
The lawmakers said reducing tax on betting but pushing for more tax on petroleum was the same as mocking poor families.