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KRA, MCAs lock horns over Sh2 million car grant

By Fredrick Obura | February 26th 2021

NAIROBI, KENYA: The Kenya Revenue Authority will tax car grants extended to Members of County Assemblies after intervention by President Uhuru Kenyatta.

In a notice, the taxman said the Sh2 million grant fits into the tax bracket. It plans to take away 30 per cent of the allowance leaving the politicians with about Sh1.4 million.

The decision has already attracted criticism from some MCAs noting that taking away a whooping Sh600, 000 from President’s offer will leave them with little money to buy their dream cars.

The ward representatives argue that they need high capacity vehicles to withstand the status of rural roads most of which not tarmacked. “If KRA implements the 30 per cent tax on the allowance, we will be left with only Sh1.4 million, that can only afford a small second-hand car which will be of no help owing to the status of most roads in the rural areas,” said Gilbert Tunai, a whip in the Uasin Gishu County Assembly.

Kenya Revenue Authority intends to tax car grant allowance issued to members of county assemblies immediately after the money is disbursed.

In an advisory, the taxman noted that speakers of the county assemblies and the MCAs are employees of respective county governments.

“Any payments or benefits extended to them by their governments are treated as income from employment or services rendered. The same is, therefore, subject to income tax,” said Rispah Simiyu Commissioner Domestic Taxes KRA.

“Since the grant is payable in form of cash, it, therefore, qualify as income from employment as other allowances. The car grant allowance falls within the 30 per cent tax bracket,” she added.

Early February, President Uhuru Kenyatta yielded to pressure from MCAs from the Mt Kenya region and promised them a Sh2 million car grant each after they made it a condition for passing the Building Bridges Initiative (BBI) Bill.
Uhuru’s car grant offer was seconded by ODM leader Raila Odinga, who while meeting MCAs from Nyanza region, said the representatives had a right to enjoy the privilege.

The thorny issue of the car grant has lingered since 2013 and has set up the National Executive against MCAs who have remained adamant in their push to have the benefit.

The Salaries and Remunerations Commission (SRC) has already approved the Sh4.5 billion car grants for MCAs and their speakers paving way for its implementation.

SRC chairperson Lynn Mengich said the commission has reviewed and directed the conversion of the Sh4.5 billion Car Loan Benefit to a Transport Facilitation Benefit in form of a grant for the MCAs.

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“Taking into account the principle of equity and fairness, affordability and fiscal sustainability, SRC hereby reviews the car loan benefit as set earlier to a transport facilitation benefit in the form of a grant,” read the statement in parts.
Mengich directed county governments to administratively undertake the conversion of the Car loan in transport facilitation benefit in form of a car grant for Speaker and MCAs.

Following the tax introduction to the grant, a section of MCAs now wants President Uhuru Kenyatta through the National Treasury to write to KRA to exempt the allowance from taxation.

They argue the grant will aid in buying a necessity that will make their work easier in serving the electorate.

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