Premium

On matters taxation, those shouting the loudest cannot throw first stone

The main entrance to Times Towers that houses KRA Head Quarters.

The shouting match amongst key political protagonists in the country this past week has inadvertently invited a public discourse on a taboo subject since independence. There is very little public information on the tax status of presidents for both their tenure in office and upon retirement.

The unwritten precedent, at least by the actions of the former four presidents, is for the incumbent to see and hear no evil for a retired president. Prior to the current Constitution in 2010, the law presumed the president is a supreme being incapable of committing any offenses against his people. As a consequence, it would have been considered treasonous to dare imagine what the president owned and how it was acquired.

Equally, the president enjoyed sweeping powers on what, who paid or did not pay which taxes. Whether directly or indirectly through his appointed proteges, a sitting president could confer enormous benefits not only to himself, but also to close family members and loyalists. This may explain the sheer magnitude of the Goldenberg scandal that happened right under the watch of key figures within Treasury and the Central Bank.

Not surprisingly, the architectures on the current Constitution in no uncertain terms clipped any power or privileges a president might have had on tax matters. Article 210 bars any form of tax waiver or exemption, by anybody or for anybody, except as provided by a national legislation.

Section 77 of the Public Financial Management (PFM) Act of 2012 confers such powers to the Cabinet Secretary in-charge of Finance provided (a) The National Treasury maintains a public record of such waivers, that is auditable by the Auditor General (b) the waiver has been authorised by an Act of Parliament, and (c) such waiver complies with provisions of section 82(5) of the PFM Act.

Tax waiver

Section 82 demands details on full name of any beneficiary of a tax waiver or exemption, amounts involved, the year the benefit or waiver was granted, reasons for the waiver and the law that granted such a waiver. These details must be published and publicised. In October 2018, the then CS for Treasury issued detailed guidelines/framework under which any waiver could be processed or granted.

The same procedure applies to any tax waivers under the County Governments with such powers vested on the County Executive Committee Member responsible for Finance. However, Article 210(3) exclusively and unambiguously bars any such benefit being conferred to a State Officer, whether by virtue of His/her office or nature of their work.

For avoidance of doubt, Parliament is deprived of any power to pass any law that can confer a tax benefit to any state officer under such circumstances. The broad interpretation of this shifts the highest burden on the President for the National Government and the Governors for the devolved units. This is because revenue raising measures are the responsibility of the executive arm of the government.

Despite this provision of law, the open question left unanswered is what happens with independent entities such as businesses or institutions where a President has ownership interest.

Under the tax law, these entities are presumed as separate and distinct for tax assessment. If a State Officer has a beneficial ownership interest, then taxes on him or her can only be assessed after profit share or dividend payout. A State Officer is obligated to declare this together with their employment income for tax purposes.

Trouble here arises when state officers use their vintage positions in government to influence decision that confer tax benefits to entities associated with them, family members or close allies and associates. Again here, a broad interpretation would imply that if the president or any other state officer used their position or nature of work to confer a tax benefit to an entity associated with them, then they are in contravention of the Constitution.

On this, I know our learned friends may want us to argue of its legality or illegality until the cows come home. This mirrors the explosive dossier that rocked the powers that be when Pandora's box sieved into our public lives. It is strange how the political and bureaucratic elites tried to rationalize ownership of secret foreign bank accounts when the law is in black and white.

From the now nuisance political forums at Kamukunji and Jacaranda grounds by the Azimio-One Kenya formation, the accusations have been back and forth.

But can any one side of the political divides honestly point any figures? Is it just a coincidence that the wealthiest known households or individuals in the country are those of presidents (including the sitting one) or their close family members or associates?

The blatant corruption levels of the Jubilee administration are an open secret. So there can ever be any doubt those dealings extended beyond business deals to include tax cheating. But can those in power throw the first stone? For instance, many tax related cases that were under active prosecution have collapsed like dominos since this administration came into power.

Strategic position

What is the probability of such collapse and subsequent appointments of those involved into strategic positions are random chances? If anyone is to believe these are random outcomes and the circumstances surrounding them are mutually exclusive events, then mathematics must first cease to be a perfect science!

For instance, the President has made it clear he will lead from the front on paying taxes. To give credit where it is due, we must comment him for making his pay slip public while he served as the Deputy President and as a candidate for the Presidency. To the best of my recollection, his closest competitor and now leading the charge on tax accountability from the opposition benches, the former Prime Minister and his close associates in the rallies never made theirs public.

While some may argue a tax compliance certificate was submitted for clearance during the elections, this cannot be enough. For example, while we all know as a Deputy President, the incumbent paid about Sh400,000 per month in taxes -that is not all he has to declare to prove he is leading from the front.

By his own confessions, he has earned an estimated Sh1.5 million daily from his poultry farm business. He has also bought a few shares here and there among others -have these taxes fully declared and paid? Where is the evidence?

By all accounts, the President cannot be considered as a poor man like me, whose payslip has PAYE competing 'Bamba kwa Bamba' with my monthly loan repayments. For equity and fairness, a just tax system is founded on the principle of 'To whom much is given, to him also much is expected'.

Yes, let us all pay our dues to the State -it is the greatest civic responsibility of very citizen and resident, but let each one of us pay according to their ability as prescribed in law. This is not only Biblical, but also the greatest moral and ethical obligation to the State.

Business
Widen tax base for added revenue, accountants tell state
Business
Governors welcome Sh400 billion allocation to counties
Business
Saudis to fund cooking gas plan in exchange for Kenya carbon credits
Enterprise
Premium Manufacturers shun State's pet sectors as projects rise