Dear MPs, please stop with the crocodile tears, you had enough time to deal with the VAT Act

Posted by on 11th September 2018

Categories:   Uncategorized

Politicians have a penchant for speaking from both sides of their mouth. And as National Assembly Majority Leader, Aden Duale put it in a recent interview with the local media; our MPs are being hypocritical over their sudden rage over the implementation of the 16% VAT on basic commodities.

To begin with, the Finance Bill, 2013 that was signed into law by President Uhuru in 2013 amended a number of laws relating to various taxes and duties among them being the Value Added Tax (VAT) Act that has been the center of the storm the last few days. Although the VAT on petroleum is attracting more attention, other goods also affected include: fertilizers, textbooks, milk, newspapers among other products.

These amendments that introduced 16% VAT on products that were previously exempted from consumption tax was as a result of the government’s ceding ground to the International Monetary Fund (IMF) demands. The reason for this demand by IMF was to reduce the fiscal imbalance; that is, the government’s future debt obligations at the time were projected to be different from its future sources of revenue.

Our Members of Parliament rather than scrutinize the Finance Act, 2013 and its implications on the expected implementation of the VAT Act and conclusively debate the matter, chose to suspend its operationalization until 2016. And when the 2016 implementation deadline approached, MPs once again suspended that implementation of the 16% VAT on petroleum products for two years; meaning the Act would come into effect on September 2018.

Consequently, as the 2018 deadline approached, the MPs, once again, through the Finance Bill, 2018 unanimously voted to postpone its implementation for another two years. Only this time, Treasury has gone ahead to implement the Act and hence the sudden outcry. And while we are having MPs shouting themselves hoarse over the Executive’s decision to overlook their recommendations on the matter, it’s not lost on Kenyans that they had sufficient time – 5years to be precise – to deal accordingly with the matter but chose to play party politics instead.

When defending the changes in the VAT Act, the Deputy President, William Ruto indicated that it was necessary for generating revenue for the nation’s development agenda. Indeed since the start of President Uhuru and his Deputy Ruto’s government in 2013, they’ve carried out multi-billion projects that have seen an increased borrowing by the government to satisfy these projects; despite the constant warning by IMF that the continued appetite for borrowing was going to be unmanageable.

Instead of the MPs postponing the implementation of the VAT Act, they should’ve in the interest of the public questioned the government’s appetite for borrowing; the feasibility of the projects the government was undertaking – particularly the return on investment for the tax payers. More importantly, the MPs, as the House that oversights the Executive, should’ve done its due diligence to find out if the tax payer’s money was being prudently managed.

For instance, following the series of corruption scandals that started circa 2014 wouldn’t it have been proper for the MPs to debate whether it was time to stop these continued borrowing until they nipped corruption in the bud? Rather than postponing the implementation of the VAT Act, wouldn’t it have been prudent to amend it to remove the planned increment of taxes on basic commodities in light of the mind-boggling corruption scandals?

Meanwhile, the President has been flying out negotiating deals in billions in a bid to secure loans that will enable him achieve his Big Four Agenda completely oblivious of the rising public debt. Never mind we still can’t account for the billions we’re borrowing – we lose at least a third of our annual budget to corruption annually according to the Auditor General.

If we aren’t losing the borrowed money through vague Eurobonds, we’re losing it in inflated projects like the Standard Gauge Railway (SGR) or the Lamu Port South-Sudan, Ethiopia Transport (Lapsset) Corridor project that’s dogged with controversies every waking day yet gobble up a huge chunk of tax payer’s money. Yet our MPs rather than try and curb the appetite for loans went ahead to amend the Public Finance Management (PFM) Act in 2015, taking away their oversight role and giving Treasury the discretion to raise the maximum ceiling for national debt.

Thankfully, Emgwen MP, Alex Kosgey has indicated a plan to introduce a Bill in Parliament that would reverse this and give back Parliament the powers to control government’s appetite for borrowing through the Public Finance (Amendment) Bill. Although it’s coming a little too late, it’s a step in the right direction. Introduction of such Bills is what we expect of our MPs. Not arguments on TV and public places but debating laws in the interest of their representatives.

The National Assembly leadership, led by Speaker Justin Muturi are currently consulting with the Treasury CS and the Attorney General on the way forward on the VAT Act that Treasury implemented.

In the meantime our elected leaders should take time and think deeply about their role in this country. The public on the other hand should learn from this moment and choose to be more vigilant by taking part in public participation when called upon to give input in laws. More importantly, let us give up the herd mentality during elections where we vote in six-piece. We must now consider carefully if the people we vote represent our interests.