Taxation

by Samuel Marete

At the time when this article was initially envisaged, the threat of a double taxation on personal income by both national and county Governments seemed very real (under the initial COE draft). In what I have called a rare alignment of the interests of Kenyan citizens and MPs, this danger was fortuitously averted in the PSC draft and the final COE draft. Nevertheless I shall use this article to dwell on public finances and restrictions on public officers.

The right to levy taxes and rates (Article 209)

Only the national government may impose income tax, value-added tax, customs duties and other duties on import and export goods, and excise tax. An Act of Parliament may authorise the national government to impose any other tax or duty.

Counties, on the other hand, are mandated to impose property rates (as city, municipal and county councils currently do), entertainment taxes, and any other tax authorised by an Act of Parliament.

Both national and county governments are allowed to impose charges for services.

Importantly, article 209 (5) states that 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.

Revenue allocation (Article 203)

The intent of the COE draft was to ensure that county governments have enough revenue for devolution (and particularly the decentralization of government services) to work. But it went at it by giving too much power to county governments to tax. In the final COE draft, under Article 203, this goal was more correctly realized by stating that for every “For every financial year, the equitable share of the revenue raised nationally that is allocated to county governments shall be not less than fifteen per cent of all revenue collected by the national government.” Whether this includes the cost of running these governments themselves is not clear, as the salaries of county government officials are not explicitly stated as being charges on the Consolidated Fund. In fact Article 175 (b)states that “county governments shall have reliable sources of revenue to enable them to govern and deliver services effectively”. If it turns out to be the case that the 15% includes the salaries and other running costs of county governments, then too much of that 15% minimum may go into funding the county governments, rather than actual service delivery.

Paying taxes (Article 210)

Article 210 (3) states that no law may exclude or authorise the exclusion of a State officer from payment of tax by reason of either:

1. The office held by that State officer; or
2. The nature of the work of the State officer.

A State officer is someone who occupies a state office, including, but not limited to, the President, the Deputy President, Members of Parliament, judges and magistrates, etc. It would appear from this that our MPs and other currently exempt state officers will be forced to pay tax. However, let us remember that MPs are already paying tax. It is just that they are not paying tax on everything they earn. Hence, strictly speaking, MPs are already compliant with Article 210 (3) – a classic “letter of the law” situation. To really batten down the hatches we may have to rely on Article 201 (b) (ii) which states that “the burden of taxation shall be shared fairly.”

In order for us to make this mean (as it should) that MPs and other state officers must pay taxes in full, we will probably need to enlist the help of the Supreme Court. But I am not entirely confident that the enactment of the new Constitution will automatically mean that MPs will pay their fair share of taxes.

Conduct of State officers with regard to finances (Articles 75-78)

I have nothing but praise for these sections of the proposed law.

As per the provisions of these Articles, a full-time State officer should not hold dual citizenship, is not to participate in any other gainful employment, and should not hold office in a political party. Further, State officers are to behave, whether in public and official life, in private life, or in association with other persons, in a manner that avoids—

1. Any conflict between personal interests and public or official duties (i.e. Transport Ministers should not own matatus, etc);
2. Compromising any public or official interest in favour of a personal interest; or
3. Demeaning the office the officer holds.

Article 76 deserves mention here as well. Any gift or donation to a State officer given on a public or official occasion is to be a gift to the Republic and is to be delivered to the State unless exempted by an Act of Parliament. Secondly, State officers are not allowed to maintain bank accounts outside Kenya except in accordance with an Act of Parliament. And thirdly, State officers are proscribed from seeking or accepting personal loans or benefits in circumstances that compromise their integrity. This is a well-meaning and well-constructed Article.

A retired State officer who is receiving a pension from public funds is not to receive any other remuneration from public funds excepting that pension. Such a person should also not hold more than two concurrent remunerative positions as chairperson, director or employee of—

1. A company owned or controlled by the State; or
2. A State organ.

A State officer who contravenes any of the provisions mentioned above is to be subject to the applicable disciplinary procedure for the relevant office, and may be dismissed or otherwise removed from office in accordance with that disciplinary procedure. Crucially, once dismissed or otherwise removed from office, the State Officer is disqualified from holding any other State office.

These provisions are commendable.

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Posted by Mzalendo Editor on Aug. 2, 2010

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