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Lobby group urges elaborate plan to tackle debt, opposes fuel tax

President Uhuru Kenyatta proposed the new percentage on Friday as he declined to sign a Finance Bill passed by the National Assembly that sought to halt a 16 per cent tax charge on fuel/FILE

NAIROBI, Kenya, Sep 18 – A pro-accountability lobby group has recommended setting up of an elaborate plan on how to tackle the country’s debt, opposing the proposed revision of Value Added Tax (VAT) on fuel to eight per cent.

President Uhuru Kenyatta proposed the new percentage on Friday as he declined to sign a Finance Bill passed by the National Assembly that sought to halt a 16 per cent tax charge on fuel.

Kenyatta’s proposal which has been endorsed by both Jubilee and the Opposition NASA will raise Sh35 billion in the current fiscal year running to June 30, 2019, monies that could be used to bridge an almost six per cent deficit of the Gross Domestic Product.

In a statement on Tuesday however, The Institute for Social Accountability (TISA) asked the National Assembly to cushion the county against imprudent budget cuts which could negatively impact service delivery, especially in the counties.

TISA instead proposed rationalization to ensure budgets that affect marginalized areas such as the Equalization Fund are not affected.

“The government has failed to rationalize. National Government wage bill has been growing since the passage of the Constitution yet most service delivery functions have been devolved. National Government was supposed to shrink and not expand,” TISA’s National Coordinator Wanjiru Gikonyo told Capital FM News.

According to Gikonyo, monies allocated to the National Government Constituency Development Fund (NG-CDF), and parastatals with duplicate roles could be directed to key funds that directly impact the delivery of services especially in counties.

“We have duplicate funds such as the NG-CDF and the Women’s Fund that spend up to 10 per cent on administration. Most of these funds are not well aligned with the constitution,” she pointed out.

Gikonyo stated that budget cuts, if any, should only affect non-essential areas.

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“Given the reality that the President is making a tradeoff between the livelihoods of citizens and the International Monetary Fund, he should have focused more of cutting funding for nonessential areas,” she argued.

TISA singled out the electrification program and access to water under the Equalization Funds as priority areas that should not be effected in the impending budget cuts.

The National Assembly is expected to vote on Thursday, either accepting President Kenyatta’s fuel tax proposal or retaining its initial stance suspending the taxation of fuel as provided for under the Finance Act (2013) which has been suspended twice for five years.

Although leading voices in both the Jubilee Party and minority National Super Alliance (NASA) had expressed reservations with taxation of fuel, the outcome of Parliamentary Group meetings by the two parties on Tuesday suggested a change of heart.

In a party position communicated following Tuesday’s meeting, NASA said it had granted conditional support for the eight per cent VAT on fuel for a period of a year after which the party said it hoped the tax charge will be scrapped.

“In light of the need to address the suffering of the people while ensuring development is also delivered, we recognize and appreciate that there was bilateral support for our attempt to remove VAT altogether and the President was able to meet us half way, lowering the tax from 16 per cent to 8 per cent. NASA therefore offers its conditional support for the initiative to cut VAT from the initial 16 per cent to 8 per cent,” NASA resolved after the meeting chaired by leader Raila Odinga.

Jubilee lawmakers endorsed President Kenyatta proposal, the party leader assuring them that sacrifices made by tax-compliant Kenyans will be matched by discipline.

Addressing the nation on Friday, President Kenyatta had faulted lawmakers for sacrificing national vision for political correctness when they voted on August 31 to stop VAT on fuel.

The Finance Bill (2018) brought to me yesterday (Thursday) protected the status quo and sacrificed our bigger vision. It took the easy path instead of rising to the challenges of our time. It was good politics but bad leadership,” he said.

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“As your President, I have a constitutional duty to ensure that legislative instruments presented for my signature conform to our national aspirations, fulfil government’s basic obligations to our people, and are implementable,” he added.

President Kenyatta noted that the Furnace Act (2013) on which the 16 per cent VAT on fuel is anchored was primarily crafted with the new constitutional dispensation in mind, the country having adopted a new Constitution in 2010.

“The purpose of this tax was simple. We have to pay for the new constitutional order, and the public services on which Kenyans depend alike,” he said.

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