Tough times loom after MPs snub Kenyans' pleas, pass 16pc fuel tax

Parliament session during the 2023/24 Budget Highlights on June 15, 2023. [Elvis Ogina, Standard]

The expected showdown between Kenya Kwanza and Azimo turned out to be an anti-climax as the 276 MPs voted like machines disregarding the petitions, oral submissions as well as points raised in the House to pass some clauses of the Finance Bill, 2023.

The opposition was whitewashed during the two days of debate as all their amendments were disregarded by a bullish House dominated by President William Ruto's Kenya Kwanza Alliance which carried the day.

Kenya Kwanza MPs even convinced some content creators in the House to vote against an amendment that would have saved them from surrendering five per cent of their earning from digital content.

A resounding majority of 189 MPs backed the amendments proposed in the Bill, which significantly reduced the tax rate from the initially proposed 15 per cent to 5 per cent.

In contrast, 87 MPs voted against the amendment, highlighting the divided opinion surrounding the revised tax rate. The MPs threw out an amendment by Seme MP James Nyikal who was opposed to any form of tax levied on content creators.

During last year's General Election, Kenya Kwanza had originally bagged 163 parliamentary seats against Azimio's 127, but President Ruto aggressively won over independent MPs as he signed fresh post-election pacts, in effect whittling down the opposition's numbers.

The Finance Bill debate was taking place at a time when Ruto has wooed a faction of Jubilee, a founder member of Azimio, to his side and in effect neutralised Azimio, whose Deputy Minority Whip, Sabina Chege now votes with the government.

Yesterday, tempers flared as a divided House, whose members came prepared to vote according to the position taken by their respective political coalitions, debated a proposal to double VAT on fuel to 16 per cent, exposing the 'voting-machine' nature of Parliament.

The majority and minority sides passionately engaged in debate but at the end of the day, emotions rather than reason influenced their voting with 184 MPs voting to double VAT on fuel while 88 were against in a vote where no one abstained.

Kenyans are now staring at an even higher cost of living as the prices of fuel, transport, and food are set to rise once the Finance Bill is passed.

Led by Minority Leader Opiyo Wandayi, Azimio sought to scrap the proposal and retain the VAT on fuel at 8 per cent. They argued that an increase in fuel levy would further burden the overtaxed Kenyan, warning that its implementation could spark a revolution.

"This proposal has already generated uproar and if this clause passes it will mark the beginning of the fall of this regime. This levy will affect the common person and increase cost of living in all aspects. Fuel is the driver of the economy in all facets. The government ought to have cushioned hustlers from an increment in taxes," said Wandayi.

But Kenya Kwanza MPs advocated for doubling of VAT on fuel to enable the government do away with a costly fuel subsidy programme and raise taxes to implement its manifesto.

Majority Leader Kimani Ichung'wah blamed the economic plunder on the fuel subsidies introduced by former President Uhuru Kenyatta and Raila Odinga.

He argued that by doing away with the subsidy program, the government was saving Sh16 billion monthly.

Ichung'wah told off the opposition saying that even with the proposed doubling of VAT on fuel, Kenya's rate would still be lower compared to that of Uganda and Rwanda, which are currently at 18 per cent.

He said that the government had put in place interventions such as a reduction of the import declaration fee and the railway development levy.

"Without the government-to-government intervention by government, the cost of fuel would be above Sh200. You can have varying interest rates of VAT and it can become problematic. The problem we have now is because we have varying interest rates for different commodities and there is a need for harmonization," he said.

But not even an explanation from the Finance and National Planning Committee chair Kimani Kuria would calm the verbal anarchy.

"It is taxpayers' money that has been paying the remaining eight percent under the subsidy program and this is what this proposal is curing," said Kimani.

Embakasi West MP Mark Mwenje, however, would hear none of it; "The proposed increase will hike fuel cost by more than Sh13 and also increase the cost of living."

Suna East MP Junet Mohammed said: "This is the most oppressive clause in the Bill. It will make life unbearable for Kenyans. When campaigning, KK said they will reduce taxation on fuel. We must remove the VAT on fuel otherwise there will be a revolution in this country."

Kiharu MP Ndindi Nyoro said: "In the 2023/2024 financial year budget, Sh25 billion is going to fuel subsidy that was not paid by the previous regime. Another Sh250 billion is going towards building our roads. Those opposed to this clause should then give us other revenue measures because you can't have your cake and eat it. If you want roads this is where we will get the money from."

Githunguri MP Muthoni Wamuchomba said: "We are where we are because of increased fuel levy in 2018. We cannot afford to add a levy to fuel as it is a catalyst of everything from production to cost of living. If you want to revamp the economy, adding tax is not it. Empower our farmers who will attract foreign investment into our country."

On Tuesday, MPs Babu Owino (Embakasi East), Peter Salasya (Mumias East), Jared Okello (Nyando) and Caleb Amisi (Saboti), were among the MPs who voted for the reduction of the tax from 15 per cent to 5 per cent for content creators.

MPs Esther Passaris, Wamuchomba, Mark Nyamita, and Gideon Ochanda were among those who voted against the amendment, arguing that the industry is still too young to start being taxed. But they voted against an amendment that would have scrapped the tax altogether.

Mathare MP Anthony Oluoch called for amendments to Section 24 as proposed by Mr Nyikal. Mr Oluoch expressed concern over the proposed tax on content creators, saying that it targets 'hustlers'.

He said that content creation is a time-consuming process, and even after completing one project, there is a gap before moving on to the next. Oluoch argued that taxing creators, who often rely on digital corners and ICT hubs in places like Mathare, would further impoverish them.

Dagoretti South MP John Kiarie also called for its reduction from 15 per cent.