Senate Public Accounts Committee faults treasury over tax on foreign donor funds

The Senate Public Accounts Committee on Wednesday met with the County leadership of Mombasa to review the audited accounts of the Executive for the financial year 2020/2021.

The session, chaired by Homa Bay Senator Moses Kajwang, revealed significant concerns regarding the National Treasury's decision to charge income tax on foreign donor funds.

During the meeting, it was disclosed that the Government of Japan has suspended a 3 billion shilling grant intended for the development of an Intelligent Transport System (ITS) in Mombasa. The suspension followed a demand by the Kenya Revenue Authority (KRA) to levy income tax on the grant.

The Japan International Cooperation Agency (JICA) recommended the ITS project based on a comprehensive survey conducted in 2020-2021, which identified major intersection nodes in Mombasa as ideal locations for the system.

Governor Abdulswamad Nassir of Mombasa emphasised the project's importance, citing the city's strategic position as a growing regional logistics hub.

“Given the strategic geo-positioning of Mombasa as a growing regional logistics hub and the development planning outlined in the Mombasa Gate City Master plan, efficient traffic management shall be fundamental to avoid the loss of man-hours critical to our economy,” he stated.

“The hesitation by the National Treasury to waive income tax on this grant will cripple us and gridlock Mombasa in coming years with a consequent impact on Port Operations and other critical economic activities,” he added.

The controversy comes amid widespread public protests against what demonstrators describe as “over-taxation” by the National Government.

The issue has sparked significant criticism from various quarters, including members of the Senate.

“It is unacceptable for KRA to frustrate counties by charging tax on donations. How can we expect a donor country to pay tax on its donation?” questioned Senator Richard Onyonka.

Senator Okiya Omtatah of Busia, also a member of the committee, echoed the sentiments and announced that the Senate would summon Treasury CS Njuguna Ndung’u, along with other relevant officials.

“We shall hold them to account for frustrating devolution,” he declared.

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