Members of Parliament on Tuesday rejected a move by Treasury to increase taxes on cooking gas, maize and wheat flour as they passed the Finance Bill 2020.
The MPs removed the items from the Value Added Tax pool and if President Uhuru Kenyatta assents to the bill, the shelf price of maize and wheat flour will decrease.
But if he differs with the MPs, the President will refer the Bill back to them with a memorandum, an action that will require the House to raise two-thirds majority to overturn the President's request.
“Enacting the Finance Bill as proposed by Treasury would increase Kenyans’ burden through increased prices of basic commodities by the end of this month,” said Finance Committee Chairman Joseph Limo.
The National Assembly’s Finance and National Planning Committee had recommended that the Finance Bill, 2018, be amended to change the status of maize (corn) flour, cassava flour, wheat or Meslin flour and maize flour containing cassava from exempt to zero rate.
Treasury had in the Finance Bill 2020, moved to sneak in proposals rejected by Parliament in the Tax Laws Bill.
Zero-rate allows manufacturers to claim VAT from raw materials used in making their products while exempt allows tax refund, which normally leads to a rise in commodity prices.
However, the move by the National Assembly will be a big blow to the National Treasury’s bid to raise revenue.
Treasury had projected to raise Sh38.5 billion in new tax measures stipulated in the Finance Bill.
From the Bill, the National Treasury planned to raise Sh1.5 billion from spirits and alcoholic beverages after MPs increased Excise Duty by 2 per cent for drinks with alcoholic content of above 6 per cent.
Treasury Cabinet Secretary Ukur Yatani was also seeking to raise additional Sh3 billion with the removal of seven allowable deductions from the income tax law.
MPs also removed from the VAT exemption list, tractors, some helicopters and aeroplanes not exceeding 2,000kg, items for clean cooking stoves, stoves, cookers, and barbecues.
Others are one motor vehicle imported by returning public officers from foreign postings and services such as hiring helicopters.
The removal of the said items from VAT exemption to standard is expected to yield close to Sh8 billion to the Treasury.
The National Assembly had pushed back the attempt to lift the exemptions by rejecting proposals submitted through the 2020 Tax Laws (Amendment) Bill citing higher costs and reduced incomes on Kenyans.
MPs felt that the proposed VAT charge on Liquified Petroleum Gas would have increased the price of cooking gas which contradicts government efforts to shift consumers from the use of wood fuel.
The Tax Laws (Amendment) Act, 2018 which was rejected by Parliament last year had changed the status of maize, cassava, wheat and maize flour from taxable status (zero rate) to exempt.
The move by Parliament is, however, expected to set a protracted battle between the Legislature and the Executive should the President return the Bill to the lawmakers.
The MPs threw their first salvo over the matter with Kimani Ichung’wa (Kikuyu) warning that Parliament will not be used to rubber-stamp proposals from the Executive which will affect the common Kenyan.
“We are not puppets to be used as rubber stamps to pass legislation pushed by the Executive which will be detrimental to our people,” cautioned Ichung’wa who was recently dropped as Budget and Appropriation Committee chairman.
But Ainabkoi MP William Chepkut said members need to ensure that the President’s agenda is supported by all.
“As members of Parliament our role is to support the President’s agenda. Period!” said Chepkut amid protest from some of the members.
Bomet Woman Representative Joyce Korir, while on a point of order, sought to know whether Chepkut was suggesting that Parliament should pass proposals from the Executive without ventilating.
“Is the Hon. Member trying to imply that we are puppets whose work is to rubber-stamp whatever comes from the Executive?” asked Korir.
Treasury CS Yatani was expecting to raise Sh1.5 billion from the removal of tax incentives on mortgages, NSSF income as well as bonus, overtime, and retirement benefits.
Treasury also wanted to net Sh4 billion in taxes earned from items which are set to be removed from the VAT exemption list.
He has also sought to lift exemptions on key products and services including levying tax on LPG and bonuses paid to low-income earners