Why inheritance tax debate is hot air, estate law was scrapped

Late presidents Mzee Jomo Kenyatta (right) and Daniel Moi during a past meeting. [File, Standard]

Nandi Senator Samson Cherargei has this week expressed his intention to move a motion seeking to amend an alleged law exempting the estates of ex-presidents Kenyatta and Moi from paying Estate Duty taxes and that such exemption should apply only to vulnerable members of the Society.

The proposed amendment motion by the good Senator is misconceived and based on the erroneous belief that there exists in our statutes such a law; the same having been abolished by Parliament over 30 years ago!

To place this matter in proper context, a historical analysis of the events leading to the abolition of Estate Duty Act Chapter 483 of the laws of Kenya is necessary.

The Act, which was assented to on 7 August 1963 with a backdated commencement date of 12 June 1963, imposed tax on the estates of deceased persons. Section 7 of this law set out the property that was subject to estate duty tax and included all property of which the deceased was at the time of his death, competent to dispose of; all property which immediately before the death was held for the use or enjoyment of two or more persons of whom the deceased was one; and the proceeds of any policy of assurance on the life of the deceased.

In 1969, the Act was amended through a Statute Law (Miscellaneous Amendments) Act, which was assented to on 25 June 1969 and came into force on 27 June 1969. The effect of this amendment was to exempt Mzee Jomo Kenyatta's property from being subject of estate duty.

Through Statute Law (Repeal and Miscellaneous Amendments) Act, 1981, a further amendment was effected to exempt President Moi from payment of the tax.

What, however, many of the commentators on this subject, including Cherargei, appear to be unaware of, is that shortly after the passage of the amendment exempting Moi from the tax, this Law was altogether repealed by parliament through the Estate Duty (Abolition) Act 1982, which was assented to by President Moi on June 25, 1982 its commencement date being June 28, 1982.

The 1982 law is a short piece of legislation with only 2 sections and whose sole object is stated to be the abolition of Estate Duty. Section 2 being the only substantive part of the Act provides that "no estate duty shall be levied or paid on property which passes on the death of any person dying on or after 1st January 1982."

A study of the parliamentary Hansard archives indicates that on June 9, 1982, the then Attorney General Joseph Kamere, explained that the abolition of the Estate Duty Act was being proposed because it had become a big burden to the beneficiaries of the deceased. He stated that the law had become "a big load to the beneficiaries of the deceased's property some of which had loans" and that "although the government had been collecting about Sh36 Million under that particular tax, the ruling party was expressing the will of the people in proposing the repeal of the law"

The Hansard indicates that during debate in the house, the repeal of this law received overwhelming support from among others, the Late Martin Shikuku and then Minister for Lands and settlement G.G Kariuki who lamented that the " Attorney General who is here with us now, should be told to go back and bring all the laws which are contrary to our culture for total withdrawal...we are told that we are receiving Sh36 million from the dead...we as a National Assembly cannot be forgiven by the ruling party".

Against the foregoing developments spanning the last several years, it is clear that there is no law on this subject to amend as being proposed by Senator Cherargei.

Indeed there is no law that would have required that the estates of the late Presidents Kenyatta and Moi should have been paying this tax, the same having been repealed for all Kenyans way back in 1982.

It is worthy of note that under Article 210(3) of the 2010 Constitution, no law may exclude or authorize the exclusion of a State officer from payment of tax because of the office held by that State officer or the nature of the work of the State officer, meaning parliament can no longer enact laws similar to the one exempting the 2 former Presidents from payment of Estate Duty Tax.

However, in 1969 and 1981 under the old constitutional dispensation, no such restriction expressly existed and it is strongly arguable that Parliament effected the exemption amendments for the 2 presidents in the exercise of its legitimate legislative authority.

To the extent therefore that the current debate appears to be based on a lack of proper and accurate understanding of the historical reality of the Estate Duty tax legislative processes in Kenya, and an erroneous appreciation of the current state of the relevant law in the country, the various issues being raised about the need for the estates of the 2 former presidents to pay their taxes, appears to be nothing more than yet another case of hot air.

The writer is a Tax Law Expert and Lecturer, Faculty of Law, University of Nairobi