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"id": 237281,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/237281/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
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"content": " Mr. Temporary Deputy Speaker, Sir, I beg to reply. I am very grateful that the hon. Members have shown their dedication by making very constructive contributions when debating the Finance Bill, 2006. Indeed, the Bill has taken far much longer than I anticipated when I moved it last week. 3356 PARLIAMENTARY DEBATES November 1, 2006 My Ministry too, has benefited from the insights which have come from the Floor of this august House. The outcome of this process in addition to accepting the Finance Bill, 2006, is that my Ministry and the House have built consensus on a few critical issues that were earlier thought to be contentious and that may have created some discomfort, not just in the House, but also in the country. I would consequently like to briefly highlight a few areas where consensus has been built. I mentioned yesterday that Clauses 60 and 61 of the Finance Bill, 2006, on the Sugar Development Levy, will now be deleted. I will be moving these amendments at the Committee Stage. Mr. Temporary Deputy Speaker, Sir, with effect from 1st January, 2007, the Sugar Development Levy will be collected by the Kenya Revenue Authority as Exchequer revenue. This will address the anomalies that are there within the law, that we were seeking to address by shifting the levy to the farmers. We will now make it an Exchequer issue and the money will subsequently be appropriated through this House to the Ministry of Agriculture for onward disbursement to the Kenya Sugar Board, which will hopefully make sure that the beneficiaries are the sugar-cane farmers, so that the sugar industry can be developed. The other area that I believe we will reach consensus is on Withholding Tax on finance leases, which will now be lowered from 15 per cent to 3 per cent of the gross payment. I must thank hon. Syongo for having brought to our attention the issue of the industry that had been left out when we were giving incentives to the farmers. We had forgotten the fishing industry. We will be bringing an assortment of items under the fishing industry and then zero-rate Value Added Tax (VAT) on them. We will also incorporate our youths by zero-rating VAT on welding equipment. As much as we have given them Kshs1 billion from the Youth Enterprise Fund, we also need to empower them by giving them tax concessions, so that they can become entrepreneurs. We will be bringing that amendment in order to help our youth. Mr. Temporary Deputy Speaker, Sir, the insurance industry came to us and we listened to them since they are the players. They have promised to be better regulated. They will pass on the money to the insurance companies and hence, we do not need to raise the guarantee, as we had proposed, to Kshs5 million. We have negotiated and they are comfortable with the figure of Kshs3 million. We need to get an assurance from the brokers, so that we can secure money for the people who are buying insurance covers. By leaving the guarantee at Kshs3 million and also removing the provision that we had included that this should be guaranteed by the Central Bank, then they can negotiate with their bankers on the terms under which they can get that guarantee. That is a major development in our effort to review the Insurance Act. Mr. Temporary Deputy Speaker, Sir, I have also noted that hon. Members have also pointed out a couple of other issues, and I believe that we also discussed these issues with the Finance, Planning and Trade Committee. I would just like to touch on one or two of these issues for purposes of ensuring clarity so that by the time we go to the Committee of the Whole House, and I would be happy to explain this issue further, we can think of them in terms of what we are doing. The first issue that seems to be generating some discomfort and controversy is on that amendment to the Central Bank of Kenya Act by introducing the position of a chairman. The Central Bank of Kenya Act, Cap.491, is very clear in terms of the responsibilities of the Governor and the Board. But within it, if you look at Sections 10 and 13, which define the responsibilities of the two, you will find that the role of the Board is clear, and that is to define the policy of the bank. On the other hand, Section 13 says: \"The Governor shall act under the policy as set out by the Board\". But, then, within itself, it also says that the Governor shall be the Chairman of the Board. So, basically what we are saying is that the Governor will sit as the Chairman of the Board, formulate policy and then sit as the Governor or as the Chief Executive, as defined by Section 13 and implement his own decisions. This is the mischief we are trying to define by saying let us empower our Central Bank of Kenya. Let us give it independence. Let us look at that institution of November 1, 206 PARLIAMENTARY DEBATES 3357 the Board with a clear mandate to formulate the policy of the bank. Let us give them an independent chairman so that when the Board sits, they can formulate policies and oversee the work and implementation of this policy by the Chief Executive Officer, who is the Governor. When you look at the law as we amended it in 2004, the other issue that has been of concern is that, will the Governor continue to be in charge of the monetary policy? That is very clearly stated within the law. In fact, this very House in 2004, introduced an amendment to the Central Bank of Kenya Act that created a Monetary Policy Advisory Committee that is chaired by the Governor and is charged with the responsibility of formulating the monetary policy and advising on what happens. So, what we are doing here will not bring any conflict at all. We would like to assure the House that, from the advice we have received so far, it will not bring any conflict between the Governor and the Board. In fact, it will insulate the Governor from any interference because he now has an independent Board to protect him and the institution of the bank. That is what we are seeking to get here; we are strengthening our Central Bank of Kenya, which is a critical institution in this country. We also seek to strengthen the Board, therefore, shielding the Governor from unnecessary interference and also ensuring that the Board and the Governor can work in harmony without wondering who is the boss at what time. The Board of Directors that we will appoint will no longer be answerable to the Chairman of the Board, who is also the Governor and at the same time, the employee of the Board. That is the kind of thing that we really want to bring for better governance of the Board. So, Mr. Temporary Deputy Speaker, Sir, I would really like to appeal to the House to see the good intentions we have in this amendment. Let us look at it now. Let us not wait until we look at the comprehensive Banking Act, because we are not sure when that Act will come here, or having to bring in a full amendment to the Central Bank of Kenya Act because of one item that we could dispense with in this House in good faith. We know that we are doing it for the good of this country and to secure the future of our children. Mr. Temporary Deputy Speaker, Sir, the other issue that has come out in terms of the feelings by some hon. Members is that, perhaps, the Finance Bill should not bring some amendments and these should be brought in within the substantive Acts. But I think that what we need to ask ourselves is: \"Has there been any limitation in the debate on these amendments, whether brought through the Finance Bill or through the substantive Acts?\" If the debate has not been compromised, then we could contribute to them well. If we make the amendments, they will end up amending the main Act. The House will at any time look at the Acts and make amendments to them, if it does not believe they are right. However, I would like to just confirm that we have taken pain to go through those Acts in terms of the issues that we need to address, to enhance our competitiveness as a country and support our business sector in terms of reduction on cost of doing business and the ease with which they operate. I believe that all the amendments that we brought here are intended specifically for that. I would like also to mention that this House has an obligation to Kenyans in terms of the promotion of equity; bridging the gap between the rich and poor. It is on this basis that Kenyans themselves said that they would like to see everyone of them paying their fair contribution of tax. We looked at it and agreed that even constitutional office holders should pay some tax on some allowances. We agreed that we cannot tax their salaries until there is a wider review of the Constitution. But there are some allowances like housing and entertainment that are not covered by the Constitution. We agreed that, at least, as a gesture to the rest of the Kenyans, let them pay tax on them. We believe that what we are doing is not offending the Constitution. I would like the House to support us, at least, in ensuring that, that gets done. The only other item I would like to mention in that regard is the Capital Gains Tax. Hon. Members have suggested that we should be taxing idle land. The effect is the same. But let us 3358 PARLIAMENTARY DEBATES November 1, 2006 promote our people to invest in marketable securities. We have agreed that we will not tax capital gains on the sale and purchase of bonds and stocks on the Stock Exchange. We will also not tax the capital gains on the sale of motor vehicles. But in terms of land, people had the freedom to transact for 20 years. The property market is very well developed. I think it is time that people who are benefiting from the buying and selling of property also made a contribution to the society through the paying of taxes on their gains, because that is the same money we need to provide them with security and infrastructure that property. If people cannot contribute, then we will be sending a signal that we are taxing the poor who are selling their goats, and exempting the rich who can afford property. By so doing, we will not be a caring society. Mr. Temporary Deputy Speaker, Sir, I believe that I have covered most of the issues that were raised. Mr. Temporary Deputy Speaker, Sir, I know that the other issue that was raised is, perhaps a misinformation; that we may be targeting a specific industry, or bringing measures that favour a specific industry. I would like to confirm that we, as a Government, are looking at the big and small manufacturers in this country. They are the people we are trying to promote. There is no tax measure that is targeting any specific person. We want everything to grow in a harmonized way. Mr. Temporary Deputy Speaker, Sir, more specifically, on the issue of wines and spirits, we are trying to create some harmony. We have raised taxes on them and ensured that on a percentage basis there is some parity. By raising taxes on wines from 45 per cent to 65 per cent, we were actually correcting an anomaly. This is because since 2002 their prices have never been changed. This was because the tariffs had been forgotten from the schedules. By harmonizing the tariffs charged on wines with those charged on beer, then every person who drinks them should contribute the same in terms of Excise Duty. Any other interpretation is not what we intended. I believe that I have comprehensively answered the concerns that were raised on the Floor of this House. I would like to say that it is our intention to promote our industries. We are harmonizing them and ensuring that they are not unduly affected by the tax increases. But those who can afford can contribute to the kitty. With those few remarks, I beg to move and ask the House to support this Bill."
}