Parliament meets next week to discuss President’s proposals amid outrage over high cost of living following 16 per cent tax on petroleum products since September 1
President Uhuru Kenyatta on Friday proposed a 50 per cent reduction of the controversial 16 per cent VAT tax on petroleum products to eight per cent, just hours after returning the Finance Bill 2018 to Parliament.
If his proposals are adopted by the National Assembly, which is slated to have a Special Sitting on Tuesday and Thursday, the lowest pump price of petrol will drop from Sh127 to Sh118 per litre, while diesel will drop to Sh107 from Sh115 per litre.
The President said his decision was informed by the public outcry that preceded the implementation of the tax beginning of this month, leading to increase in transportation costs and an anticipated increase in commodity prices.
“I have spent a few days listening to a wide section of views and it is clear that Kenyans are troubled by the rise in cost of petroleum products and its impact on the cost of living. I have heard and understood your concerns,” Uhuru said.
“Our aim is not to punish the poor. To be fair, in my memorandum to Parliament, I’ve proposed a drop of 50 per cent in the proposed VAT on petroleum products.”
This means the Kenya Revenue Authority (KRA) will now raise around Sh17.5 billion from this new tax, leaving a budget deficit of Sh17.5 billion out of the estimated Sh35 billion targeted by the initial VAT tax on petroleum.
However, when the President addressed the Nation on Friday afternoon, he proposed a raft of measures including budget cuts on non-priority areas and austerity measures in all levels of government to bridge the deficit.
“I have proposed cuts in spending across arms of government on hospitality, foreign and domestic travels, training and seminars and other similar categories. This cut will require discipline from all to ensure that the sacrifices made by Kenyans are matched by our discipline,” he said.
The President further urged businessmen to also reduce their prices on goods and services, to reflect the VAT reduction. “I expect them not to take advantage of Kenyans and to lower their prices without any delay,” he said.
Members of Parliament will now have to raise a two-thirds majority when they meet next week if they want to overturn President Uhuru’s proposal. They had indicated that the 16 percent VAT should be suspended untill 2020.
The President assured Kenyans their taxes would be used prudently and to prove his commitment, he also proposed to Parliament to raise the budgets of all the institutions fighting corruption.
“Your taxes will be used well. I have also proposed to increase resources available to fight corruption. I have increased funding to the Judiciary to speed up corruption cases, the Office of the Director of Public Prosecutions as well as the other agencies involved in investigations,” he said.
In July, Chief Justice David Maraga held a press conference and complained of severe budget cuts by Parliament that has compromised the functions and projects of the Judiciary and Judicial Service Commission (JSC) like the implementation of mobile courts; derail the case backlog programme and ICT improvement; as well as paralyse the running of the JSC itself.
The Judiciary had submitted a budget of Sh31.2 billion for 2018/2019 but Parliament slashed Sh17.3 billion and down later to Sh14.5 billion through the Appropriation Act.
The President defended his administration for implementing the tax that has caused public outcry across the country and noted that its intentions were noble.
“The purpose of this tax was simple. Kenya must pay for the new constitutional order, and development projects in the country. These cost money, “ he said adding that further delay in the implementation of the tax would compromise Kenya’s ability to deliver basic services and maintain the current development trajectory.
He also noted that huge spending by his government had been brought by the many structures created by the 2010 Constitution including a bloated Parliament, the 47 devolved units and County Assemblies, and the 16 independent commissions, excluding the Judiciary.
“In addition to supporting devolution, your taxes have been used for an aggressive and successful development agenda. Today, millions of Kenyans travel on new roads built by this administration; others are under construction. Millions of homes have been connected to electricity. Our mothers now have access to safer and cheaper maternal care,” he said.
“In addition to free primary education, parents can now send their children to day secondary public schools, for free. Our investment in infrastructure is at its highest since independence. I wish to remind Kenyans that the MoU between Kenya and the United States of America for direct flights was signed in 2008; it is only now, after consistent investment in Jomo Kenyatta International Airport under my administration, that the first direct flight to America is a reality,” he added.
The ball is now at the National Assembly, which will be meeting next week to discuss the President’s proposals, and if they agree and amend the Finance Bill 2018 to reflect the VAT reduction, budget cuts and austerity measures in various sectors in the national and county governments will follow.
If Parliament passes the Bill the second time, the Speaker will re-submit it to the President within seven days. Thereafter, the President shall within seven days assent to the Bill if he accepts it. If he fails to assent to it, or fails to return it to Parliament, then it will automatically become a law after 14 days.
But since the President consulted the leadership in Parliament and given the Jubilee Party has a majority in the National Assembly, his proposals are likely to sail though in the House and the President assent to the Bill.