Sweeteners MPs got to pass punitive taxes

The sweeteners MPs got to pass punitive taxes , even while resisting the contentious Housing Fund, which was later turned into a levy, raged, the Treasury also gave MPs Ksh1.5 billion, hived off from the first supplementary budget for the 2022/2023 fiscal year, as a seed fund for constructing 100 houses per constituency.
MPs have been tasked with locating public land where such homes could be built in their respective areas.
With the support of President William Ruto’s government, the lawmakers are also working to pass two bills that will guarantee they keep the Ksh44 billion National Government Constituencies Development Fund.
The CDF Act, 2013, was declared to have violated the separation of powers concept by the Supreme Court in a decision made last year. The fund provided MPs power over community initiatives, and it had been a crucial instrument in their reelection campaigns, thus the verdict was a major setback for them.
MPs will receive protection from anticipated pay reductions from the new 35% tax band that will begin to affect top incomes from next month by eliminating mileage taxes.
The government will receive more than Ksh200 billion from additional taxes, thanks to the Finance Bill 2023, which was enacted despite a valiant effort by the opposition MPs.
It includes a number of tax reforms that will be particularly harsh on consumers, chief among them the tripling of the value-added tax on petrol to 16%.
The Bill also introduced two income tax brackets, with 35% for those making more than Ksh800,000 per month and 32.5% for those making between Ksh500,000 and Ksh800,000 per month.
Kenyans making Sh800,000 per month would now pay Ksh242,283 in total PAYE before relief, up from Ksh234,783 under the previous highest band of 32.5%.
Due to the additional two PAYE bands on their income, persons making Ksh1 million have a tax requirement of Ksh312,283, up from Ksh294,783.
These have a direct impact on MPs, who get a basic salary of Sh710,000 in addition to a number of allowances that can increase their take-home pay to the Sh1 million area.
A change to the Income Tax Act would make one of these allowances, the mileage claim, tax-free for anyone traveling for official business, based on a standard rate set by the Automobile Association of Kenya.
Tax experts at consultancy company KPMG Kenya, noted in their review of the Finance Bill that the proposed amendment, “reaffirms the practice of excluding mileage and travel reimbursements from employment tax, and also reinforces the limits within which such benefits may be extended to.”
By lowering the part of their compensation that is subject to top rate income tax, this relief will effectively decrease the vulnerability of MPs to those rates.
Through a tiered system depending on the distance traveled, lawmakers jointly submit claims for millions of dollars in mileage reimbursements each year at a cost of Ksh116.63 per kilometer.
The Salaries and Remuneration Commission published a gazette notice in July 2022 setting the ‘Zone 1′ distance restriction at 350 kilometers from Parliament and the weekly mileage cap at 700 kilometers. Areas like Nairobi, Nakuru, Machakos, and Kiambu would fall under this.
Maximum mileage reimbursements for parliamentarians in this zone per month are Ksh353,778.
Zone 2 claims cover a minimum of 351 kilometers for the outbound trip and depend on the actual mileage for the return trip. Additionally, the maximum claimable sum is determined by the actual distance.
President Ruto asked MPs to take action to defend the CDF  by aligning it with the Constitution, and to establish an oversight kitty for Senators to regulate financial transfers to counties, when he addressed the opening joint session of the 13th Parliament last September.
The parliamentarians, who had been informed by the Treasury a week earlier that it would not contribute money to the fund in accordance with the Supreme Court order, were made aware of the fund’s importance by the President’s involvement. The legislation now allots 2.5% of the nation’s total earnings to be distributed to the constituencies.
The Constitution of Kenya (Amendment) Bill, 2022, which attempts to enshrine the NG-CDF in the Constitution, is one of the two Bills being tabled in the House. The Treasury proposed a gradual distribution of the monies, subject to the Attorney-General’s permission, after the MPs threatened to obstruct government business in the House if the CDF funds’ release was delayed further in November.