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High Court declares sections of the finance bill unconstitutional

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The High Court has declared sections of the finance bill unconstitutional dealing a blow to the government’s plan to raise revenue to meet its budget.

In her ruling Justice Wilfrida Okwany dismissed taxes on mobile money transfer, imported vehicles and bottled water as null and void.

The ruling coming as the National Assembly finance committee grilled Treasury CS Henry Rotich on the Government’s plan to raise revenue ahead of debate on the Presidential memorandum on the finance bill on Thursday.

MP’s questioned the logic in the proposed taxes which they argued were insensitive to the plight of the common Mwananchi and would only serve to increase the cost of living.

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Rotich urged MPs to consider the President’s memorandum arguing that Kenya stands to benefit from the new tax regime, in realizing the deficit in its budget.

But as Rotich was defending the government’s plan on raising revenue, the High Court had other ideas after activist Okiya Omtatah challenged the taxes proposal arguing there was no public participation.

The latest setback from the courts comes as MPs prepare to debate the President’s memorandum proposing a raft of measures aimed at meeting the government’s 2018/2019 budget.

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The memorandum targets to raise more revenue by increasing levy on fuel products to 8%,  as well as increasing taxes on sugar confectioneries, money transfers, betting companies and winners, housing fund and Kerosene.

On Thursday MPs will debate the President’s proposals where the memorandum will require at least 233 of the 349 MPs to either alter the President’s view or shoot it down all together.

 

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19-year-old boy charged with defiling girl three years younger

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[Courtesy]

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A 19-year-old teenager is in trouble with authorities for allegedly defiling a 16-year-old girl.
Tyson Ongaki has been charged before a Kisumu Chief Magistrate’s court and accused of intentionally defiling the minor on various dates. The crime was allegedly committed in Bomet.
The teenager who appeared before Chief Magistrate Peter Gesora however denied the offence and has been released on a Sh100,000 bond.
The court heard that after committing the offense on diverse dates between March 26, 2021 and May 14, 2021, the teenager moved to Kisumu.
He has also been charged with committing an indecent act with a minor.
An investigating officer handling the matter told the court that the suspect was arrested in Kisumu.
The magistrate directed that the matter be heard on June 15, 2021.

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KRA must ease tax filing to boost revenues

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Nikhil Hira Independent tax consultant and Director Bowmans Coulson Harney (law firm). [Courtesy]

Anyone who has been following Kenya’s budgets over the last few years will recall headlines each year saying that the country has set its largest-ever budget. 
The upcoming 2021/22 fiscal year is no exception, with Treasury Cabinet Secretary Ukur Yatani announcing a budget of Sh3.6 trillion – yes, the biggest ever! A little over Sh2 trillion will come from government revenues, with approximately Sh1.8 trillion of this from tax revenues. 
The balance will be borrowed – another common feature of the last few years. 
This year’s budget comes amidst an economic crisis brought on by the Covid-19 pandemic, with the inherent assumption that the pandemic will come to an end before the start of the next financial year. 
Given surges in infections that are being seen globally, and indeed in Kenya, this assumption may well be the deal-breaker. 
The Ministry of Health has already said that Kenya may see another wave of infections in July, fuelled by the Indian variant. This could result in more lockdowns with the associated impact on the economy and indeed revenue collections. The lack of vaccines is an issue that the government must address as a matter of great urgency if the country is to get through the pandemic without further economic woes. 
While deficits in government budgets are not uncommon, Kenya seems to be annually widening the gap between expenditure and revenues. 
If one applies this model to their household budget, the upshot will almost certainly be bankruptcy. 

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What is actually required is curtailing recurring government expenditures, which is something that the government has acknowledged in the past with proposed austerity measures. 
The reality is that Kenya has not succeeded in doing this, and the pressure on revenue collection is exacerbated. 
When you add to the high level of wastage and corruption we are witnessing, the deficit will almost certainly continue to widen. 
The responsibility for tax collection and enforcement lies with the Kenya Revenue Authority better (KRA). 
There is no doubt that the authority has improved significantly in this task since it was set up in 1995. 
The taxman estimates that 4.4 million tax returns were filed by June 30 last year, up from 3.6 million in the previous year.  While this is a significant improvement, when compared to the country’s population, this number of returns seems unusually low. 
The increase in the number of tax returns, is to a large extent, due to the online reporting system, iTax, and a major push by KRA through taxpayer education.
There is no doubt that the online system has made filing tax returns significantly easier and gone are the large queues of people witnessed at Times Tower on deadline day. 
That said, there is still much to be done to make filing returns a seamless and painless exercise. 
System downtime during filing periods is something that all of us will have experienced, although, in typical Kenyan fashion, we inevitably wait until the last day to file our returns as we do with most things! 
The spreadsheet that one uses to file a return is by no means the simplest to use.  One key issue seems to be that taxpayers are not alerted to changes in the model until they try to upload a return. 
The spreadsheet does not allow one to make it more relevant to their sources of income – in essence, it is too rigid and inflexible. KRA should be able to rectify this without too much effort.
Last year was unusual in that different rates of tax were applicable in the first quarter as compared to the rest of the year.  This followed the Covid-19 relief measures that were introduced in April 2020. 
There was much debate about whether the changes were meant to apply for the whole year or whether some form of apportionment was needed. 
In the end, the decision was made for apportionment. One can argue about what the correct treatment should be, but the issue was how long it took for the decision to be made and, indeed, to amend the iTax system. 
The age-old notion has always been that the more complex and difficult it is to file a tax return, the more likely it will be that taxpayers simply won’t file their returns. While the issue with the system has been resolved, there is an inherent administrative issue here that must be addressed. 
KRA has to be significantly more proactive in dealing with changes in rates and law to ensure the least inconvenience to taxpayers. 
The writer, Nikhil Hira, is the Director of Bowmans Kenya.
The views expressed in this article are the author’s and not necessarily those of Bowmans Kenya  

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BBI ruling: Nakuru MCAs criticise judges

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The leadership of Nakuru County Assembly has faulted the five-judge bench for declaring Building Bridges Initiative (BBI) Bill illegal. Speaking at the assembly Monday, the ward reps said the verdict was contrary to the wishes of the residents.

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