County taxes are illegal, say Senate, Treasury

Senate Finance Committee Chairman Billow Kerrow (right) and member Mutula Kilonzo Junior during a meeting with  National Treasury PS Kamau Thugge at KICC, Tuesday. [PHOTO: BONIFACE OKENDO/STANDARD]

By ALPHONCE SHIUNDU

Kenya: All the new taxes introduced by governments in the 47 counties are illegal, a powerful committee of the Senate has said.

The Senate’s Committee on Finance,Commerce and Economic Affairs and the National Treasury agreed to have the taxes revoked because they were sabotaging the national economy, stifling the business environment and scaring away investors.

In a move likely to throw the budgets of county governments into a spin, the senators, with the support of the National Treasury now want a legal opinion of the Attorney General, Prof Githu Muigai, within the next seven days as they seek to declare null and void all the laws levying the new taxes.

The senators described the new taxes that have sparked riots in some counties as unconstitutional.

Principal Secretary of the National Treasury Kamau Thugge told the committee at a meeting in Nairobi’s Kenyatta International Convention Centre that none of the county governments consulted the National Treasury prior to slapping their citizens with the new taxes.

“We had done a lot of work in terms of improving the business climate. We don’t want an unfriendly business polity,” said Dr Thugge yesterday. Some of the taxes levied in the counties were not in line with the national economic policy, he added.

Chairman of the Senate Committee Billow Kerrow (Mandera) led senators Peter Mositet (Kajiado), Beatrice Elachi (nominated), Mutula Kilonzo Jr (Makueni), Anyang’ Nyong’o (Kisumu), Catherine Mukiite (nominated) and Bonny Khalwale (Kakamega) in piling pressure on the Treasury PS to ensure that the exorbitant county taxes were all revoked.

Thugge, however, was not sure whether the National Treasury can on its own declare the Finance Bills – the laws in the counties levying the new taxes – illegal.

Thugge said he would have to consult the Attorney General for legal guidance before taking any action.

The senators, perhaps stung that governors had refused to appear before the key committee to explain their new taxes, said Thugge together with the AG, and with the approval of the Senate, had the power to tame the runaway taxation in the counties.

The new taxes have sparked riots and protests in some counties such as Mombasa, Kiambu, Nairobi, Machakos and Meru.

“Clearly, the county governments are prejudicing the national economic policy. Why are you finding it difficult to issue an order that the Finance Bills are suspended until they conform to the national economic policy?” posed Dr Khalwale.

The committee chairman, Kerrow, said the new taxes were illegal because they were unconstitutional.

“The Finance Bills approved in some counties are not in line with the Constitution. There was no public participation… the law requires public participation on all legislation,” said Kerrow.

He said Article 209 of the Constitution allowed counties to only impose “property rates; entertainment taxes; and any other tax that it is authorised to impose by an Act of Parliament”.

a charge on chickens

So far, neither the Senate nor the National Assembly had granted authority for the counties to levy any new taxes apart from those that deal with property or entertainment.

“The law [Article 209(4)] says the national and county governments may impose charges for the services they provide. If someone is imposing a charge on chickens in Kakamega County, what service are they providing?” posed Kerrow.

Article 209(5) of the Constitution is explicit that counties should not make laws to ruin the country’s economic development.

“The taxation and other revenue-raising powers of a county shall not be exercised in a way that prejudices national economic policies, economic activities across county boundaries or the national mobility of goods, services, capital or labour,” reads the law.

Kerrow said the taxes were “unreasonable”.

“Why would a person pay Sh5,000 for a licence for an M-Pesa kiosk in Nairobi and then pay Sh13,000 for the same licence in Busia? It doesn’t make sense. We want the county governments to raise revenue, but not in the manner in which they are doing it,” Kerrow told the National Treasury PS.

The disparities in taxation measures, the senators said, were likely to perpetuate inequality in the counties.

Thugge agreed: “I have a lot of misgivings about what happened (the new taxes)…even the law is very restrictive regarding what the county governments can do.”

Article 191(2)(b) is also very clear that the national laws will be the only option if counties are hurting the economy.

“National legislation prevails over county legislation if the national legislation is aimed at preventing unreasonable action by a county that is prejudicial to the economic, health or security interests of Kenya or another county; or if the county legislation impedes the implementation of national economic policy,” reads the Article.

Nyong’o added that the challenge the counties will have to deal with once the taxes are revoked is how those who had already paid the new rates will be reimbursed.

The senators’ move also comes after the Controller of Budget, Agnes Odhiambo, revealed that many of the counties were collecting less than the county councils that preceded them, yet the counties are levying higher taxes. The senators are keen to know where the counties take the money they collect, given that the local authorities were inefficient, yet they appear to have collected more.