President Ruto and allies’ big U-turn in high taxes
President Uhuru Kenyatta caved in to criticism when he proposes proposed higher taxes on petroleum products just years ago, with his deputy William Ruto and his brigade terming the measures as insensitive.
With Mr Kenyatta out of office and Dr Ruto in State House, the then-opposers of higher tax have become some of its most vocal supporters, raising questions on the sincerity of these individuals on matters of national importance. The 2023 Finance Act proposes even higher taxes and levies on ordinary Kenyans.
The debate over contentious proposals in the Finance Bill and the debt burden have put President William Ruto and senior officials in his government on the spot over their past pronouncements and positions.
The fresh push to reinstate a 16 per cent value-added tax on petroleum products as well as introduce a housing levy have exposed President Ruto, some of his Cabinet Secretaries and lawmakers holding key positions in the majority side as masters of doublespeak.
For example, Dr Ruto and some of the CSs — who served as MPs in the last Parliament—strongly opposed the unpopular fuel tax in 2021, forcing then-President Uhuru Kenyatta to shelve it and approve eight per cent instead.
Assuming power, Dr Ruto and his allies have made a U-turn and approved in the Cabinet a proposal in the Finance Bill 2023 to subject petroleum products to 16 per cent VAT, up from the current eight.
This will now be taken through a parliamentary process in what is expected to be an intense debate following public outcry.
By implementing this proposal, prices of nearly all goods and services are expected to go up against Dr Ruto’s pre-election promises of bringing down the cost of living.
Prices of nearly all goods and services have gone up in recent months, including the cost of electricity, fuel and maize flour.
Accused Kenyatta
Dr Ruto’s allies then backed the Petroleum Products (Taxes and Levies (Amendment) Bill, 2021) that sought to reduce VAT on petroleum products from the current eight per cent to a low of four, even as they accused Mr Kenyatta of burdening Kenyans with more taxes.
The Bill was introduced by the National Assembly’s Finance and National Planning Committee then chaired by MP Gladys Wanga (now Homa Bay Governor) following two petitions to the House.
Dr Ruto would on April 5, 2022, call a press conference at his Karen official residence to demand passage of the Bill following delays by the House to consider.
Defence Cabinet Secretary Aden Duale, who was then Garissa Town MP, had also during the campaigns written to then-Speaker of the National Assembly Justin Muturi protesting delays to have the Bill processed by the House.
“The Petroleum Products (Taxes and Levies (Amendment) Bill, 2021), whose passage has been frustrated, should be processed in
Parliament as a matter of national emergency to help address the fuel shortage crisis,” said Dr Ruto then.
Cabinet Secretaries Duale, Kipchumba Murkomen (Transport and Infrastructure), Kithure Kindiki (Interior), Moses Kuria (Trade), Mithika Linturi (Agriculture), Aisha Jumwa (Public Service) and Alice Wahome (Water) were some of the Ruto allies, who were vocal in rejecting the fuel tax in the last Parliament.
But when the proposal to reinstate the controversial fuel tax was recently brought to the Cabinet by the National Treasury, they collectively approved it, exposing them as masters in the art of political doublespeak on issues of national interest.
National Assembly Majority Leader Kimani Ichung’wah, Budget Committee Chairman Ndindi Nyoro and his Finance and National Planning counterpart Kuria Kimani are expected to marshal members in the House to support the high fuel taxes despite being at the forefront in rejecting it during Mr Kenyatta’s administration.
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Mr Kimani was one of the members of the Finance Committee who introduced the Bill to the House.
The committee in its report tabled on December 2, 2021, recommended to the House to approve the Bill that sought to reduce VAT to four per cent.
Hansard reports
The Sunday Nation sifted through Hansard reports of the National Assembly and the Senate as well as public remarks made by some of the leaders who are currently in the government during the period when the country had a heated debate over high fuel prices and taxation.
Some of the current top government officials had also rejected a 1.5 per cent housing levy proposed in 2019 but are now backing a three per cent monthly deduction towards housing.
The Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works had directed employers to deduct 1.5 per cent of staff salaries and remit the money to the Kenya Revenue Authority (KRA) from May of that year.
That directive was, however, put on hold by a court after the Federation of Kenya Employers (FKE) challenged it.
On April 17, 2017, Prime CS Musalia Mudavadi, then Amani National Congress (ANC) party leader, called a press conference and hit out at Mr Kenyatta’s administration for “overburdening taxpayers with many levies”.
“The new 1.5 per cent house tax on Kenyan workers is insensitive and burdensome because you are taxing an already overloaded worker. It is also unlawful. This worker is already burdened by about the highest income tax in the world today; add to the value-added tax on a wide range of goods and services, load on levies on petrol and petroleum products; then bring in this new levy,” Mr Mudavadi told journalists.
“You are killing the goose that lays the golden egg. If this government is truly committed to affordable housing, it must make it possible for Kenyans to build houses affordably.”
President Ruto’s Economic Adviser, David Ndii, also questioned the rationale of taxing employees 1.5 per cent of their salaries to fund housing.
President William Ruto’s economic advisor Dr David Ndii. Dr Ndii has questioned the rationale of taxing employees 1.5 per cent of their salaries to fund housing.
He claimed then that the housing levy was going to benefit only middle-class Kenyans in Nairobi and not a majority in the rural areas.
“Who thinks for this government? How do you justify forcing a minimum wage tea picker in Kericho or waiter in Kwale to finance middle-class housing in Nairobi?” Dr Ndii asked.
According to the Hansard, Mr Duale led lawmakers allied to then-Deputy President Ruto to rally against high fuel prices by demanding a review of some of the levies charged on petroleum products.
“Let me be very clear and tell the country that this House rejected the increase in price and imposition of VAT on petroleum products, but the President used his powers under Article 115,” Mr Duale said.
He was also at the forefront of the passage of the eight per cent VAT in 2018 when he served as the National Assembly majority leader.
Deny two-thirds majority
The then-Garissa Town MP had orchestrated a scheme to deny the House the requisite two-thirds majority (233) required to override the President’s decision.
But he would later – after he was kicked out of the leadership position – accuse Mr Kenyatta of abusing his veto powers to frustrate “hustlers” by overturning a decision by the House to scrap VAT on fuel.
“On the matter of fuel, for every litre of petrol you buy, Sh78 goes to taxation. VAT is Sh12 for every litre of petrol and Sh8 for a litre of diesel,” Mr Duale said on the floor of the House.
Defence Cabinet Secretary Aden Duale. According to the Hansard, Mr Duale led lawmakers allied to then-Deputy President Ruto to rally against high fuel prices by demanding a review of some of the levies charged on petroleum products.
“Cumulatively, out of the Sh145 you pay for a litre of petrol, Sh78 goes to taxation. The President is using his powers to make innocent hustlers in Kenya suffer. We must reduce the Sh78 taxation on a litre of petrol and other levies.”
During the session, Mr Nyoro described the prices as insensitive and inconsiderate to Kenyans.
He was even among some of the MPs who wrote to then-Speaker Justin Muturi proposing an amendment to the VAT Act, the Excise Duty Act and the Fuel Levy Fund Act so as to bring the prices down.
“I want to tell this government, especially the Energy and Petroleum Regulatory Authority that sets these prices, that the prices of fuel products in Kenya must fall. As we sit in this House, we are going to do whatever it takes like what I have already done in proposing the amendments in three Acts of Parliament,” Mr Nyoro said.
“Fifty-five per cent of the pump prices is actually money that goes to our government through taxes and levies. The government must rescind the appetite for taxation so that we can pass the benefit to the consumers of fuel by lowering the current prices, especially of diesel, petrol and kerosene.”
Mr Ichung’wah also joined the fray and even demanded that the House amend Article 115(4) of the constitution to clip the President’s veto powers.
“You remember it is on record in the Hansard that this House voted to defeat the infamous eight and 16 per cent VAT on fuel,” said Mr Ichung’wah.
“In July 2008, when the price of crude oil was at the highest in the history of the world — at $147 per barrel. Fuel in Kenya then was at Sh71 to Sh73 per litre. Today, the cost per barrel is only $72 while fuel in Nairobi is at Sh135 per litre. Is it, not time the Committee suspends the operationalisation of Road Levy, Road Maintenance Levy, VAT and Excise Duty on fuel?”
Currently, motorists spend an average of Sh193 per litre, out of which Sh63.86 goes to taxation. The proposal to have VAT at 16 per cent is expected to see the price shoot up drastically.
A similar protest against the high cost of fuel was captured in the Hansard report of the Senate on September 22 when the House was debating a censure motion against then Petroleum and Mining Cabinet Secretary John Munyes and his Energy colleagues Charles Keter.
Prof Kindiki and Mr Murkomen led the charge in accusing Mr Kenyatta of overtaxing Kenyans when the country’s economy was on its knees.
“Allow me to say that the causes of these fuel prices are first over-taxation. There are eight taxes on fuel which are very significant. There is the VAT, excise duty, anti-adulteration of fuel levy, railway maintenance levy and all manner of taxes. We must bring this down,” Prof Kindiki said during the session.
Mr Murkomen blamed the high taxation on the March 9, 2018, handshake between Mr Kenyatta and opposition leader Raila Odinga.
He claimed the two had mobilised their members in the National Assembly to approve the Finance Bill that proposed high taxes.
“I hope the former Prime Minister does not think that we will forget that he mobilised his MPs to go and pass the Bill that required people to pay high taxes. He held a Parliamentary Group meeting to make sure that his MPs pay high taxes. We will not listen to anybody from the minority side passing the buck,” Mr Murkomen said.
National Assembly Speaker Moses Wetang’ula – who is a significant player in Kenya Kwanza administration – had in 2018 threatened protests against 16 per cent VAT on petroleum products.
He demanded that the government rescind the imposition of the tax as it would have made life unbearable.
“In the event that this tax issue is not resolved, we are going to take serious steps including calling for civil disobedience in the process of making the government rescind these taxes,” Mr Wetang’ula said on September 9, 2018.
Some of the current government officials have contradicted themselves on several projects initiated by the Jubilee regime.
Before Dr Ruto and Mr Kenyatta fell out, Jubilee politicians defended the regime’s internal borrowing as well as some of the major infrastructure projects.
They now claim that some of the projects were used to siphon taxpayers’ money—particularly after the March 2018 handshake between Mr Kenyatta and Mr Odinga.
Some of the loans, they claim, were misappropriated. Criticism of loans taken for mega projects has also been a contentious subject.
During an interview on Citizen TV on Wednesday, Mr Duale described the Standard Gauge Railway as the most expensive and overpriced infrastructure by the Jubilee government. He further claimed corruption in its tendering.
As majority leader, Mr Duale defended the project, describing it as having tangible benefits. BY DAILY NATION
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