Kenya: Ruto threatens to slash dynastic tax exemptions

At a church service on 5 February in Kenya’s coastal town of Malindi, an agitated Mama Ngina Kenyatta, the mother of previous president Uhuru Kenyatta, dared the government to auction her property over tax evasion claims levelled against the former first family.

Mama Ngina, who stays out of the public eye, was responding to numerous political jabs directed at her family by President William Ruto, his deputy Rigathi Gachagua, and their allies.

“I am surprised to hear some people say that others do not pay taxes. If you fail to pay taxes, then your property should be taken and auctioned to pay what you owe. There’s no need of mudslinging anybody so that you can be seen to be working,” said an angry Mama Ngina.

An unhappy Mama Ngina Kenyatta complete with changed demeanour. Talking like her late husband, she takes on President Ruto directly. Dares government to seize assets for firms that fail to pay taxes. Claims it is about maligning the name of her family as her businesses pay taxes pic.twitter.com/DsQjYP2qsB

— Stephen Mutoro (@smutoro) February 5, 2023

Five days earlier, while speaking at a retreat for parliamentarians in Mombasa, Ruto accused the Kenyatta family of sponsoring opposition leader Raila Odinga’s anti-government rallies “because they fear a probe on tax evasion.”

“Even if they sponsor demonstrations so that they don’t pay tax, I want to promise them that they will pay tax. There are no more exemptions. This country is not an animal farm, where some are more equal than others,” said the president.

Stamp duty tax waiver

To many observers it was clear the head of state was referring to the controversial waiver on stamp duty granted in 2019 when the Kenyatta family’s Commercial Bank of Africa merged with the NIC Bank, controlled by the family of former Central Bank Governor Philip Ndegwa, to create the NCBA Bank.

At the  time, the National Treasury exempted the two banks from paying share transfer tax amounting to KSh350m ($2,793,742) a move many believe must have been influenced by then-President Uhuru Kenyatta.

In the recent past, Ruto and his allies have pointed their guns on the Kenyatta family accusing it of all manner of misdeeds ranging from state capture, tax evasion and corruption to sponsoring anti-government rallies.

Kenyans are worried that bad blood between Ruto and Kenyatta, which began in early 2018 after the latter reconciled with his sworn political enemy, Odinga, might divide Kenyans further and even threaten the country’s economic recovery.

It is not the only fringe benefit that the Kenyatta family is being accused of enjoying. Ruto’s allies have also fished out a little-known law that exempted the families of  the late President Jomo Kenyatta and his successor, Daniel Moi from paying estate duty on inherited property.

Everyone must pay taxes. We demand that the Kenya Revenue Authority conducts an audit on tax waivers enjoyed by the First Family in the last 10 years.

“Did you know that there is a law in Kenya exempting the Kenyattas and Mois from tax on inherited land? Animal Farm!” Denis Itumbi, President Ruto’s “Mr Fix it” tweeted on 30 January.

Itumbi published both the Estate Duty Act, which provides for taxes on property left behind by a deceased person, and the 1969 amendment which reads: “This section shall not apply to His Excellency Mzee Jomo Kenyatta, nor to His Excellency Daniel Toroitich arap Moi”. At the time, the former was president while the latter was his deputy.

Estate Duty Act amendment

In 2021, a group of Kenyans petitioned the National Assembly to repeal the exemption on grounds that it was discriminatory and unconstitutional, but the effort faltered.

Nandi Senator Samson Cherargei, a staunch ally of  President Ruto, has filed a proposal at the Senate to amend the Act by removing the names of Kenyatta and Moi arguing that the law only favours the two families.

“We are losing KSh370bn through exemption of taxes and it is what my proposal seeks to rectify because everybody must pay their fair share of taxes,” says Cherargei.

A section of the ruling Kenya Kwanza Alliance senators is already pushing for a probe into tax waivers enjoyed by the First Family during Kenyatta’s reign.

“Everyone must pay taxes. We demand that the Kenya Revenue Authority conducts an audit on tax waivers enjoyed by the First Family in the last 10 years,” says Nyandarua Senator John Methu, a member of President Ruto’s United Democratic Alliance (UDA) party.

Kimani Ichung’wah, the majority leader in parliament, accuses the Kenyatta family of stashing billions of shillings in offshore accounts and has also asked the Kenya Revenue Authority to investigate the matter.

“KRA is obligated to check if the hundreds of billions offshore in the pandora papers had taxes paid here before being shipped offshore,” says Ichungwa referring to the 2021 investigations by the International Consortium of Investigative Journalists (ICIJ).

The probe linked Kenyatta and six members of his family to 13 offshore companies with accounts worth millions of dollars.

Firms under investigation

Kenya Revenue Authority (KRA) has already announced it is investigating more than 200 firms, some of them associated with allies of the former president.

“KRA’s audit will be thorough. Those companies found to have evaded paying taxes because of their connections with influential individuals in the former administration will have no choice but pay what they owe the government,” said a KRA official who is not authorized to speak to the media.

Feeling the heat of the onslaught, NCBA managing director John Gachora recently said the lender was ready to pay the KSh350m waived by the state during the merger between NIC Bank and CBA Bank.

What we are experiencing is just the beginning and I fear it might get worse as politics of deceit, betrayal and skulduggery take centre stage.

“I want to assure the public that should the court find that NCBA was not entitled to that waiver, I can promise that the following day we will send a cheque of KSh350m to the exchequer,” Gachora told the media, adding that the money in question is nothing compared to the amount the bank pays in tax every year.

To ensure the tax message reaches all and sundry, the ruling Kenya Kwanza Alliance bloggers have come up with a hashtag #UhuruNiKiulipaUshuru – loosely translated as ‘freedom is about paying taxes’ – which many believe is aimed at the Kenyatta family.

‘Targeting Kenyatta’

The opposition coalition members led by Raila and Wiper Democratic Movement Leader Kalonzo Musyoka are now accusing President Ruto of targeting his predecessor unlike Kenyatta himself and former President Mwai Kibaki who did not harass those they succeeded at State House.

The constant criticism has also forced the former head of state to break his silence on political matters since leaving office.

While condoling with the family of the late George Magoha, who served as an education cabinet secretary in his regime, Kenyatta dismissed Ruto and his team as empty talkers.

“There are two types of people. There are people who talk a lot about what they will do and do nothing and those are many. But there are people who will talk less but their deeds are seen,” said the former President last month in a thinly veiled attack against his successor.

Political analysts warn that the bad blood between the two top politicians is expected to worsen as days go by.

Kenyatta-Ruto political battles

According to political analyst John Charo, Kenyans should brace themselves for more political battles pitting Ruto and his allies against Kenyatta and his supporters.

“What we are experiencing is just the beginning and I fear it might get worse as politics of deceit, betrayal and skulduggery take centre stage,” Charo tells The Africa Report.

Political analyst Ochieng Onyango concurs, saying if the situation worsens to the extent that the government investigates the former first family’s wealth, then the move might have serious ramifications on Kenya’s political scene.

“If an outgoing president feels his successor might go after him then the incumbent might do something crazy or unusual to remain in power, and his actions might negatively affect the whole country,” notes Onyango.

“The utterances by the president and his allies risk being construed as a revenge mission against the former president and his family,” says Macharia Munene, a lecturer at the United States International University in Nairobi.

“What looks bad is the impression being created that he [President Ruto] is targeting an individual or family. That is not good at all because taxation policies are not meant for individuals but for the whole country,” says Munene.