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It’s official: MCA’s car grant will attract 30 per cent tax

BUSINESS
By Dominic Omondi | February 27th 2021

The taxman has deflated the spirits of Members of County Assemblies after confirming that the car grants they received from the State will be taxed.

In an advisory to the chairman of the Council of Governors (CoG) Chairman Martin Wambora, the Kenya Revenue Authority (KRA) said the loan, which had been converted into a grant following a presidential decree, would attract a 30 per cent income tax before hitting the accounts of MCAs.

“On the issue of ‘car grant,’ since it is payable to the said employees in form of cash, it therefore qualifies as income from employment as ‘other allowances',” said KRA’s Commissioner of Domestic Taxes Rispah Simiyu.

Earlier, MCAs had protested the tax charge, noting that slapping the grant with an income tax of 30 per cent would leave them with insufficient money for better cars.

Initially, the money was given in the form of a loan, which President Kenyatta turned into a grant. The decision has since been backed by the Salaries and Remuneration Commission (SRC).

However, KRA noted that the tax payout would be in compliance with the law.

Mrs Simiyu said KRA issued the advisory following several inquiries from counties.

Each MCA got a car grant of Sh2 million, which means that the State will pay Sh4.5 billion to the 2,224 ward representatives.

Members of Nakuru County Assembly during debate and passage of Building Bridges Initiative (BBI) Bill. [Kipsang Joseph, Standard]

Governors were given the greenlight to convert the loan into a grant by SRC chair Lynn Mengich in line with President Kenyatta’s pledge to MCAs.

Last week, however, Controller of Budget Margaret Nyakango raised concerns on the move.

In a letter to SRC Chief Executive Officer Ann Gitau, Nyakango cautioned that most counties budgeted had for a car loan facility and not a grant.

“In others, the car loan facility is being implemented through a legislation enacted to create a revolving fund. These legislations do not provide for issuance of car grant,” said Ms Nyakango. The letter was copied to CoG and County Assemblies Forum.

She said some counties merged the car loan facility with mortgage facility into the revolving fund.

“We therefore seek your clarification on how to convert the car loan facility into a car grant benefit, taking into consideration the scenarios raised and how to treat the interest so far repaid by the beneficiaries,” Nyakango told SRC in the letter dated February 17.

Mengich responded to a letter by CoG chair giving consent to MCAs' car grant, which immediately got condemnation from some quarters, terming it a “bribe” to entice ward representatives into passing the Building Bridges Initiative Bill.

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