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"id": 237447,
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"speaker_name": "Mr. Kipchumba",
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"legal_name": "Joseph Kipchumba Lagat",
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"content": "Thank you, Mr. Temporary Deputy Speaker, Sir. I want to support this Bill. I want to start with the issue of the Kenya Revenue Authority (KRA). I am happy that the Minister has increased the retention rate from 1.5 per cent to 2.0 per cent. But that is not even sufficient. We have been told here today that even the 1.5 per cent is not being given to KRA as it should be. We are all aware of the noble role played by the KRA. We must encourage the \"cow\" that gives us milk. I would, therefore, suggest to the Minister to increase this rate to 2.0 per cent. He has encouraged the receiver of revenue to retain part of the money it collects. I would like to October 31, 2006 PARLIAMENTARY DEBATES 3251 request him to also allow the collector of revenue to retain 2.0 per cent of the revenue it collects. In that way, the KRA will not have to collect money and give all of it to the Treasury. I know that it is difficult to determine the level of the retention because the amount of the rate has to be calculated. But it can be worked out in such a way that the KRA retains a certain amount of money that it requires for its operations. It will be very unfair for KRA to submit all the revenue that it collects to the Treasury, because its operations may grind to a halt due to lack of funds. The KRA may even not be able to plan, because it will not be sure of how much money it will be allocated by the Treasury. I would, therefore, request the Minister to explore the possibility of allowing the collector of revenue to retain 2.0 per cent of the revenue. Two-and-half per cent is a very low rate for an institution that collects revenue. We must encourage it to do a good work. We are aware that previously there were a few problems in the KRA. Its employees were being paid different salaries. I am happy that, that problem has since been sorted out. Currently the Government gets only 5 per cent of its revenue from external sources, and this is very encouraging. In fact, I want to encourage the Minister to reduce this to zero per cent. Mr. Temporary Deputy Speaker, Sir, I am aware that the insurance industry has been fleeced by lawyers, who claim millions of shillings from it. Whenever there is an accident, the first people to contact the victims are lawyers, who know that they can make quick money from claims arising from accident covers. The fact that accident claim proceeds have been reduced to a maximum of Kshs3 million will, in my view, benefit the insurance industry. I want to commend the Minister for this move. But that figure should be re-looked into, because Kshs3 million is still very high. I also want to talk about the Central Bank of Kenya. Sometime back, I mentioned in this House that we are concerned about the Governor of the Central Bank of Kenya being also its Chairman. I mentioned this in this House and you can refer to the HANSARD. I do not think there is anything wrong in what the Minister has proposed. The only problem is that we must define the operational role of the Governor vis-a-vis the role of the chairman. The chairman plays a non- executive role on a daily basis. That is very critical. I expected an amendment to the Central Bank of Kenya Act. In my view, merely providing for a chairman in this Bill is not sufficient. What is proposed here is just to substitute \"chairman\" for \"Governor\" wherever the word \"Governor\" appears. This is very basic. This is a very sensitive matter. I expected the Minister to propose a far reaching amendment to the Central Bank of Kenya Act. In such an amendment, we can spell out the role of the Governor. I have heard various arguments that, indeed, a chairman for the Central Bank of Kenya can curtail the powers of its Governor. He cannot curtail them if the role of the Governor is put in black and white. For instance, the chairman should not be able to dictate to the Governor on interest rates or closure of commercial banks. Such interventions are contentious. If this is allowed, the chairman could wake up one morning and order this or that bank to be put under statutory management. So, the roles of the Governor and the chairman must be put in black and white. Even though we may pass this Finance Bill as it is, the Minister should go further and spell out the various roles of these very important personalities, who will be running our most important financial institution. Mr. Temporary Deputy Speaker, Sir, I have seen some very scary penalties in the Finance Bill. For example, Section 153 states that anybody who makes false or fraudulent claims will be entitled to a penalty of two times the amount. Let us not create laws that will scare away investors who would want to make certain claims. We are not saying that the Kenya Revenue Authority (KRA) is perfect. What happens if the KRA gives you a false invoice? What is the businessman supposed to do yet he is scared by this provision? I would have expected that if we have this provision in the Bill, we should say that the KRA must also be penalised for the same. Indeed, if it is proved that KRA invoiced you on a wrong basis, they should also bear the burden. However, I do not think the KRA is ready to bear that burden. I know that KRA will not want issues that will be taken to court. I know people would like to evade paying taxes. We are aware of this! However, 3252 PARLIAMENTARY DEBATES October 31, 2006 we must give business people an opportunity for arbitration. We must give them an opportunity to claim what they think is an infringement on their part. We must not scare Kenyans to the extent that they are afraid to prove that their claims are wrong. Man is to error! Therefore, I want to request the Minister that if, indeed, he wants to punish the business people, he should also be willing to punish the KRA. However, I would not want the KRA to be punished because I want them to give me the services. I want to request the Minister to re-look into that issue. Mr. Temporary Deputy Speaker, Sir, I was happy that when the Minister was moving the Bill, he said that he has reduced the deposit that is required from Kshs5 million to Kshs3 million. I expected him to go down to even Kshs2 million. I do not know why he cannot reduce it to Kshs2 million. If you reduce deposits on banks and insurance brokerage firms, the effect, if, indeed, those brokers and insurance companies are honest, will go to the consumers. We want to encourage competition. If you want to encourage competition in this country and, indeed, if there were many banks in this country competing for the few customers that we have, the interest rates would easily come down. However, the industry is controlled by a cartel of very few institutions. Therefore, if we want to encourage competition in the insurance industry, the insurance and brokerage and banks must be as many as possible. That is the easiest way so that every year, we should not be lamenting about high interest rates and costs. I have heard many people complaining about high prices on fuel and other commodities. The solution is to ensure there is fair competition and as many players as possible in the industry. I would, therefore, still encourage the Minister to come down by another Kshs1 million so that we encourage as many Kenyans as possible to enter the markets. The other issue was on the difference in taxation. We must ensure fairness in taxation. I heard the argument advanced by my colleague, Dr. Oburu, about taxes on cigarettes and wine. I think that is very basic. If we said that there should be a level playing field, I think we will not be asking for too much. If a product does not conform to the standards, we should ban it all together. However, if a products conforms to the required standards, we must ensure that there is fairness. For example, malt beer has been reduced to Kshs48 per litre while the others cost Kshs54. We must look at fortified wines. I do not think that we would like to run a country where taxes are not equitable. Mr. Temporary Deputy Speaker, Sir, I am happy that we are encouraging the formation of an Islamic Bank. There have been complaints from our Muslim brothers that they want an institution that will assist them. We must always not include very many amendments in the Finance Bill. The reason why many hon. Members are discouraged is because we are aware that there are so many Bills that are pending in the House yet we want to sneak in many of those issues through the Finance Bill. If you look at the issue of Very Small Aperture Terminal (VSAT), the Minister intends to charge companies a tax of 5 per cent and Value Added Tax (VAT) yet most of these companies do not operate in this country. I am yet to understand from the Minister how he is going to enforce some of these regulations. Some of these companies that give us these facilities are not in this country. The satellite facilities are run from outside Kenya and some of them are paid from outside. How does the Minister intend to enforce these regulations? Let us not make laws that we cannot enforce. Why would we want to pass legislation which we cannot enforce? I know that for a company like DSTV, you can charge it from the payments that we make in this country because you can easily determine the revenue. The Minister is talking about gross revenue but this is too high. I would have expected him to talk about gross profit. If you talk about gross revenue, you are discouraging investments in this country. Therefore, I want to encourage the Minister to re-look at the issue of telling us that he will charge 5 per cent on companies that do not operate from within this country. There must be a mechanism, but I do not know which one he is going to put in. However, I am sure that he is an intelligent Minister and he will give us some of these details. Mr. Temporary Deputy Speaker, Sir, I am happy that bonds that will be used to develop infrastructure will be exempted from duty. That is very welcome. October 31, 2006 PARLIAMENTARY DEBATES 3253 Overall, this Finance Bill has given us a lot of incentives. The Minister has also said that in terms of deposits for mortgage, they will be exempted up to Kshs3 million. However, Kshs3 million is very little. I do not think you can get a house for Kshs3 million. The Minister should consider this so that he can increase it to probably Kshs5 million. We are not asking for too much because Kshs3 million is very little money. In Clause 32(a), the Minister clearly says that the Central Bank of Kenya (CBK) may from time to time, where it deems necessary to do so, carry out an assessment of the professional and moral suitability of persons managing or controlling institutions. That is very dangerous! If today we are told that the CBK is going to carry out an assessment on the ability of the manager of a certain bank, what would the public think? What will happen tomorrow? People will immediately run to the bank to withdraw their money. Even the idea alone of investigating a bank manager will create panic. I would like the CBK to introduce stringent measures before the person is appointed to that position. Let us not do this kind of business midway because it will cause a lot of panic. If today you are told that the Governor of CBK is being assessed, what will happen in this country? Therefore, I want to encourage the Minister to reconsider removing this matter from this Bill. I do not see the essence. If we think that somebody has misbehaved midway, the only option would be to remove him all together through other laid down mechanisms. However, let us not go into the business of saying that we are going to assess the moral suitability of somebody at the middle of business when, indeed, the company is performing well. Mr. Temporary Deputy Speaker, Sir, I have also seen the amendment that the Minister intends to bring; that no institution shall open a branch or establish a subsidiary outside Kenya except with the prior approval of the Minister. I do not oppose that proposal, but I would like the Minister to explain to me, in simple terms, when he replies to this debate, why he wants to approve all this. As we are all aware, we are now forming the East African Community. Therefore, to require the Minister to approve such moves by financial institutions is not appropriate. I think the Minister should just be informed of such an intention. In the recent past, the Kenya Commercial Bank (KCB) opened a branch in Southern Sudan. The same bank has also established a branch in Tanzania. Why would we want to introduce another level of bureaucracy by requiring banks to seek approval from the Minister whenever they wish to establish branches outside Kenya? Probably, the Minister owes me, if not this House, an explanation as to why he wants companies to go through such a process. In my view, a bank just needs to inform the Minister of its intention to open a branch outside this country after satisfying itself that it is doing well in Kenya. Mr. Temporary Deputy Speaker, Sir, if I heard the Minister right, he has withdrawn the requirement that insurance brokers should deal with only a maximum of three insurance companies. I am happy he has done so. We are now operating in a free market economy. Therefore, insurance brokers should be allowed to deal with as many insurance companies as they can. We cannot be restricting businesses in some sectors and giving a free hand to companies in other sectors. I am happy that the Minister has acceded to the argument that introducing a sugar-cane levy would increase the production costs of sugar-cane, and thus erode the farmer's earnings. The Minister has finally seen the essence of encouraging the growth of agriculture in this country. Therefore, the withdrawal of the sugar-cane levy is, indeed, welcome. Mr. Temporary Deputy Speaker, Sir, while agreeing with the proposal to have the receiver of revenue retain some of the repayments, I would like this to be done in consultation with the Minister. A receiver of revenue cannot, at the stroke of a pen, reduce the amount of money from repayments. There should be some kind of consultations with the Treasury, so that whenever the receiver of revenue retains the money, the Treasury will be informed."
}