President Ruto and Allies Reverse Course on High Taxes
A few years ago, President Uhuru Kenyatta capitulated to criticism when he proposed higher taxes on petroleum products; his deputy William Ruto and his brigade deemed the measures insensitive.
With Mr. Kenyatta no longer in office and Dr. Ruto occupying the State House. The former opponents of higher taxes have become some of its most vociferous supporters. Calling into question their sincerity on matters of national importance.
The Finance Act of 2023 proposes even higher taxes and fees for ordinary Kenyans.
The debate over contentious proposals in the Finance Bill and the debt burden. Has put President William Ruto and senior members of his government on the spot regarding their previous statements and positions.
The renewed push to reinstate a 16% value-added tax on petroleum products. And introduce a housing levy has exposed President Ruto, several of his Cabinet Secretaries. And key majority lawmakers as masters of doublespeak.
For instance, Dr. Ruto and a number of the CSs — who served as MPs in the previous Parliament — vehemently opposed the unpopular fuel tax in 2021. Compelling then-President Uhuru Kenyatta to abandon it and approve 8% instead.
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Upon assuming power, Dr. Ruto and his allies executed a U-turn. And approved in Cabinet a proposal in the Finance Bill 2023 to subject petroleum products to 16% VAT. Up from the current 8%.
As a result of public outrage, this will now undergo a parliamentary procedure, which is expected to involve an intense debate.
By implementing this proposal, nearly all goods and services are expected to increase in price, contrary to Dr. Ruto’s pre-election pledges to reduce the cost of living.
In recent months, prices have increased for nearly all goods and services, including electricity, fuel, and maize flour.
Charged Kenyatta
Dr. Ruto’s allies then supported the Petroleum Products (Taxes and Levies (Amendment) Bill, 2021). Which sought to reduce VAT on petroleum products. From the current 8% to a minimum of 4%, while accusing Mr. Kenyatta of taxing Kenyans more.
The bill was introduced by the Finance and National Planning Committee of the National Assembly. Then chaired by MP Gladys Wanga (now the governor of Homa Bay), in response to two House petitions.
Dr. Ruto would hold a press conference at his official residence in Karen on April 5, 2022. To demand passage of the Bill following delays in consideration by the House.
During the campaigns, Defence Cabinet Secretary Aden Duale. Who was an MP for Garissa Town at the time, had also written to then-Speaker of the National Assembly Justin Muturi. To protest delays in the processing of the Bill by the House.
Dr. Ruto stated at the time that the Petroleum Products (Taxes and Levies (Amendment) Bill, 2021. Whose passage has been stymied. Should be processed in Parliament as a matter of national emergency to help address the fuel shortage crisis.
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In the previous Parliament, 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 among the Ruto allies who vehemently opposed the fuel tax.
But when the National Treasury recently presented the Cabinet with a proposal to reinstate the controversial fuel tax, they unanimously approved it, exposing them as masters of political doublespeak on matters of national importance.
National Assembly Majority Leader Kimani Ichung’wah, Budget Committee Chairman Ndindi Nyoro. And his Finance and National Planning counterpart Kuria Kimani. Are expected to rally House members in support of the high fuel taxes. Despite being among the first to oppose them during Mr. Kenyatta’s administration.
Mr. Kimani was among the Finance Committee members who introduced the bill to the House.
In its report submitted on 2 December 2021. The committee recommended that the House approve the bill to reduce the VAT to 4%.
Hansard reports
GossipA2Z combed through Hansard’s reports of the National Assembly and the Senate. As well as public statements made by some of the current government leaders. During the period of heated debate over high fuel prices and taxes.
Some of the current top government officials opposed a proposed 1.5% housing tax in 2019 but now support a 3% monthly housing deduction.
In May of that year, the Ministry of Transport, Infrastructure, Housing, Urban Development. And Public Works instructed employers to deduct 1.5% of employee salaries and remit the funds to the Kenya Revenue Authority (KRA).
In response to a challenge by the Federation of Kenya Employers (FKE), a court stayed the directive.
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On April 17, 2017, Musalia Mudavadi, then-party leader of the Amani National Congress (ANC), held a press conference in which he criticized Mr. Kenyatta’s administration for “overburdening taxpayers with numerous levies.”
“The new 1,5% house tax on Kenyan workers is insensitive and burdensome, as it taxes an already overburdened worker.” It’s also illegal. Mr. Mudavadi told journalists, “This worker is already burdened by roughly the highest income tax in the world; add to that the value-added tax on a wide range of goods and services, impose levies on gasoline and petroleum products, and then impose this new levy.”
“You are killing the golden egg-laying goose. If this government is truly committed to affordable housing, it must make it possible for Kenyans to construct houses at an affordable price.”
David Ndii, the Economic Advisor to President Ruto, questioned the rationale behind taxing employees 1.5% of their salaries to fund housing.
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He claimed at the time that the housing levy would only benefit Nairobi’s middle-class Kenyans and not the rural majority.
Who makes decisions for this government? How can you justify compelling a tea picker earning minimum wage in Kericho or a waiter in Kwale to fund middle-class housing in Nairobi?” Dr. Ndii asked.
According to Hansard, Mr. Duale led lawmakers aligned with then-Vice President Ruto in a protest against high fuel prices by requesting a review of certain levies on petroleum products.
Mr. Duale stated, “Let me be very clear and tell the nation that this House rejected the price increase and imposition of VAT on petroleum products, but the President exercised his authority under Article 115.”
As the National Assembly’s majority leader in 2018, he was also instrumental in the passage of an eight percent value-added tax.
Reject the two-thirds majority
The then-Garissa Town representative had hatched a plot to deny the House of Representatives the necessary two-thirds majority (233) needed to overturn the President’s decision.
Later, after he was removed from the leadership position, he would accuse Mr. Kenyatta of abusing his veto power to frustrate “hustlers” by reversing the House’s decision to eliminate fuel VAT.
“In regards to fuel, every liter of gasoline purchased is taxed Sh78. Mr. Duale stated on the floor of the House that VAT is Sh12 per liter for gasoline and Sh8 per liter for diesel.
“Out of the total Sh145 you pay for a liter of gasoline, Sh78 is taxation. The President is using his authority to punish innocent con artists in Kenya. We must reduce the Sh78 per-liter tax on gasoline and other levies.”
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Mr. Nyoro described the prices as insensitive and inconsiderate to Kenyans during the session.
Even more, he was among the MPs who wrote to then-Speaker Justin Muturi proposing a change to the VAT Act, the Excise Duty Act, and the Fuel Levy Fund Act to lower prices.
“I want to inform this government, specifically the Energy and Petroleum Regulatory Authority that sets these prices, that fuel prices in Kenya must decrease. As we sit in this House, we will do whatever it takes, just as I have done in proposing amendments to three Acts of Parliament, said Mr. Nyoro.
“Fifty-five percent of the price at the pump goes to the government in the form of taxes and fees. The government must rescind its appetite for taxation so that we can pass the savings on to fuel consumers by reducing prices, particularly for diesel, gasoline, and kerosene.”
Mr. Ichung’wah even demanded that the House amend Article 115(4) of the constitution to limit the President’s veto power.
Mr. Ichung’wah reminded the audience that it is on record in the Hansard that the House voted to reject the infamous eight and sixteen percent VAT on fuel.
“In July 2008, the price of crude oil reached its all-time high — $147 per barrel — in the history of the world. A liter of gasoline in Kenya cost between Sh71 and Sh73 at the time. Today, the price per barrel is only $72, while the price per liter of gasoline in Nairobi is Sh135. Is it, not time for the Committee to suspend the implementation of the Road Levy, the Road Maintenance Levy, the Value-Added Tax, and the Excise Tax on fuel?”
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At present, motorists spend an average of Sh193 per liter, of which Sh63.86 is taxation. The proposed 16 percent rate of value-added tax will likely result in a significant price increase.
A similar protest against the high price of fuel was captured in the Hansard report of the Senate on September 22, when the House was debating a motion of censure against the then-Petroleum and Mining Cabinet Secretary John Munyes and his Energy colleagues Charles Keter.
Prof. Kindiki and Mr. Murkomen led the charge against Mr. Kenyatta, accusing him of overtaxing Kenyans when the country’s economy was on its knees.
“Allow me to state that excessive taxation is the primary cause of these fuel prices. There are eight extremely significant taxes on fuel. There are numerous taxes, including the value-added tax, excise duty, anti-adulteration of fuel levy, and railway maintenance levy. Prof. Kindiki stated during the session, “We must reduce this.”
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Mr. Murkomen attributed the high taxation to the handshake between Mr. Kenyatta and opposition leader Raila Odinga on March 9, 2018.
He claimed that the two had mobilized their National Assembly members to support the Finance Bill, which proposed high taxes.
“I hope that the former prime minister does not believe that we will forget that he mobilized his MPs to pass a bill requiring people to pay high taxes.” He convened a meeting of the Parliamentary Group to ensure that his legislators pay high taxes. “We will not tolerate anyone on the minority side shifting blame,” Mr. Murkomen stated.
Moses Wetang’ula, the speaker of the National Assembly and a key player in the Kenya Kwanza administration, had threatened protests against a 16 percent tax on petroleum products in 2018.
As the tax would have made life unbearable, he demanded that the government reverse its decision to impose it.
Mr. Wetang’ula stated on September 9, 2018, “If this tax issue is not resolved, we will take serious action, including calling for civil disobedience, to force the government to repeal these taxes.”
On several projects initiated by the Jubilee regime, several current government officials have contradicted themselves.
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Before Dr. Ruto and Mr. Kenyatta fell out of favor, Jubilee politicians defended the regime’s internal borrowing and several major infrastructure projects.
They now assert that some of the projects were used to embezzle taxpayer funds, particularly after the handshake between Mr. Kenyatta and Mr. Odinga in March 2018.
They assert that some of the loans were misappropriated. The criticism of megaproject loans has also been a contentious issue.
Mr. Duale described the Standard Gauge Railway as the most expensive and overpriced infrastructure of the Jubilee administration in an interview with Citizen Television on Wednesday.
He also claimed there was corruption in the bidding process.
Mr. Duale, as majority leader, defended the project by describing its tangible benefits.
President Ruto and Allies Reverse Course on High Taxes
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