In this era of vendetta politics, it is no surprise that Presidential aide Dennis Itumbi is active on twitter educating us on the law, and publicizing a public petition to repeal the exemptions that he says was stalled two years ago in the National Assembly.
Looking beyond who’s doing the telling, and their political motivation, this is an object lesson in presidential impunity, legislative acquiescence and deepening inequality in Kenya, a situation so dire that Oxfam reports eight thousand people own more wealth than the bottom 99.9% (more than 44 million people). Seen in this light, and President William Ruto’s recent mantra that everybody must pay tax, the discourse on tax exemptions requires thought. Not political posturing.
The story goes that in June 1969, using a parliamentary procedure to make “minor amendments to the statute law”, Jomo Kenyatta procured Act No. 10 of 1969 from the second Parliament, which inserted a new sub-section 7(2) into The Estate Duty Act to state that the law “shall not apply to His Excellency Mzee Jomo Kenyatta, First President and Commander-in-Chief of the Armed Forces of the Republic of Kenya.” Younger readers should consider that Kenyatta was a deified figure for whom a lot of rules were bent, broken or abandoned. But by this time, he was becoming tyrannical.
Contextually, the political situation in Kenya on 27 June of 1969 was an eerie calm before a terrible storm. Ten days after Kenyatta signed this law, Tom Mboya, his 38 year-old Minister for Economic Planning and Development was gunned down in a Nairobi street; possibly a victim of factional power struggles over succession to the severely ailing Kenyatta.
By October the same year, a police massacre in Kisumu had been undertaken, and our first vice president Jaramogi Oginga Odinga was placed under house arrest indefinitely. The leading opposition party, Jaramogi’s Kenya People’s Union (KPU) was proscribed, and Kenya was a de facto one party state. At this time, Daniel arap Moi was in his second year as Kenya’s third vice-President. Moi (and others) had dissolved their opposition party (KADU) and joined Kenyatta’s KANU six years earlier; assisting Kenyatta and Mboya to defeat Jaramogi in the 1966 battle for ideological control of KANU. Moi eventually succeeded to the presidency when Jomo Kenyatta died in his sleep at the Mombasa State House on 22 August 1978. Like Kenyatta, Moi was a capitalist.
Three years later, it was President Moi appending his signature to Act No. 10 of 1981, which rather than repealing Kenyatta’s illicit tax evasion loophole, added the Moi family to the gravy train by amending Act No. 10 of 1969 the phrase “nor to His Excellency Daniel Toroitich arap Moi” immediately after Jomo Kenyatta’s name. Moi signed the law at the end of November 1981, heralding a consequential year in Kenya’s history.
At the beginning of 1982, Moi carried out a wave of arrests and detention without trial of his critics. In June 1982, he rammed Section 2A through Parliament, which proclaimed that “there shall be in Kenya only one political party, the Kenya African National Union.” By 1 August 1982, an attempted coup d’état briefly unseated Moi as President, making him thereafter as tyrannical as his predecessor.
The Kenyatta-Moi tax exemption laws have shocked me. I had assumed I knew all about their abuse of power, and that I had the tools at my disposal to know. For example, I was once told to my face by a former Attorney General that the statute miscellaneous amendments law was literally the only bill I should read if I was investigating corruption. The omnibus procedure bundles amendments to many laws in one bill and is often used to sneak stuff past parliament, which votes once on all proposed amendments. I used this advice over the years to identify various shenanigans, breaks and gifts.
I had never considered going back decades in time.
Certainly, I assumed that any such ancient laws would have been expunged from our books by the many reviews of our laws that have been done over the years. What was the Law Reform Commission doing? What was the Constitution of Kenya Review Commission (CKRC) doing? What have we collectively as a civil society been doing if we could not spot these two glaring examples of abuse of law making powers, by two presidents? I presume that no such mischief was perpetrated by Mwai Kibaki, whom retrospectively, I have begun to feel more and more was misunderstood by my cohort of activists. I’m certain that Uhuru Kenyatta could not have done this, but there is his Finance Minister’s controversial waiver of stamp duty owed on a merger.
What are the implications of the discovery of these tax breaks? Should we immediately start computing back taxes and make a demand for payment? Will these revelations make the size of the two estates subject to public reporting?
To make advances in the struggle to end grand corruption, some feel we need to know what the estates of our presidents are made of as a matter of public record. Already, this argument is before a court in a civil matter brought by the Chelugui family against the Moi estate wherein they are alleging that Moi “intentionally hid the value and specifics of his estate from the will presented to courts for succession as part of a ploy to avoid scrutiny on some of the assets he allegedly acquired illegally.”
Public discussion of the tax break laws will be embarrassing but probably not costly for the Kenyatta and Moi families. It is well known that though both started poor, their patriarchs left multi-million dollar estates after life-time service in politics. I am sure that they both received better legal advice on estate management than is indicated by the bare-faced statutory exemptions of 1969 and 1981. In other words, there are other ways of minimizing tax exposure.
Nevertheless, these personal exemption laws point to a misconduct in office which has the effect of denying the public a lawful tax benefit from the estates of the two presidents. We’re potentially talking big numbers. The Kenya Kwanza boosters of this law should appreciate, however, that estate duty is globally unpopular and will alienate KK’s own bourgeoisie supporters once they learn the details of what was intended to be paid out in estate duty tax. The law as I read it, declares that 8 percent is due on any estate valued at KSh 500,000, rising on a scale to a top-level of 40 percent “where the value of the estate exceeds £2,000,000 (KSh 40 million).” Interest on unpaid estate duty is 9 percent annually, and where the value of the estate does not exceed KSh 500,000 no estate duty is owed to the taxman. A fairly wide tax bracket indeed.
In view of its punitive and confiscatory nature, many a Kenyan will hope that this 1948 law is repealed or at least remains a dead letter law.