Court: MPs tax-free salary unconstitutional
MEMBERS of Parliament (MPs) will be no longer enjoy tax free wages after Chief Justice Sir Albert Palmer threw out the award in a landmark ruling yesterday.
Sir Albert declared the tax free salary and all other entitlements in Regulation 2015, which was amended and awarded to MPs by the Members of Parliamentary Entitlement Commission (PEC), “unconstitutional and null and void”.
He also declared regulations that gave tax exemption to MPs are also null and void and further stated that the Regulations which made provision for the various entitlements for the Chairman of the Government caucus null and void.
Sir Albert however, dismissed the request for the court to struck out entitlement covering MPs with meal and subsistence allowances extended to cover weekends.
In his 16-page judgment, Sir Albert said the amendment to the regulations 33 and 34 of the 2015 regulation not only makes MP’s salaries tax free but makes the final inclusion it seems so that almost everything that MPs now receive are tax free, including allowances.
He said exemption of entitlements other than salaries was introduced under the 2011 Regulations.
“Since 1990 however, other benefits such as appointment grants, constituency allowances and terminal grants and the value of any benefit accruing on a MP holding office (such as minister) from his entitlements to housing, utilities and domestic servants, have been except from income tax by virtue of paragraph 21 of the Third Schedule to the Income Tax Act,” he said.
The controversial award, which sparked public outrage, excluded MP’s salaries from being taxed.
The tax-free pay was awarded to MPs in April last year.
In response, a group of citizens, including West Makira MP and Parliamentary Wing Leader of the People First Party Derrick Manu’ari, challenged the decision in court.
Other claimants are Waeta Ben Tabusasi, Ruth Liloqula, Tony Hughes, and Reverend Mark Graham.
The chief justice said the overall effect of the amendment is that it basically makes all salaries and entitlements received by MPs almost 100 percent exempt from tax.”
He said it is not disputed that the Members of Parliament (Entitlements) Commission (MPEC) has power under section 69B 2 (c) (iii) to make salaries and entitlements exempt from tax and other liabilities.
“The Claimants do not deny this in their submissions.”
He added that what the Claimant’s found offensive and aggrieved about is the lack of proper consultation, dialogue and discussion from relevant authorities, including as pointed out by their lawyer in his written submission, that is in the very least the MPEC should have invited submissions from officers in the Ministry responsible for income tax, consider these and ensure that any proposed new tax exemption for Members of Parliament is in line with the Act and other budgetary considerations.
“I am satisfied on the evidence that this was not done.
“In essence the issue here is that the MPEC again failed to comply with the section 69 (B) of the Constitution to consult broadly but more important with relevant authorities on this important subject and where it did, the evidence adduce was that the amendment should not be made.
“I am again satisfied on the evidence adduced before me on the balance of probabilities that the MPEC failed to consult with relevant authorities on this matter in particular, submissions from relevant offices within Government that handle taxation matters so that any tax exemption granted is duly catered for under taxation laws and processes, bearing in mind that no tax may be imposed by an Act of Parliament (section 106 of the Constitution).
“In the case of Income tax this is imposed by the Income Tax Act (cap. 123) and so any exemption needs to be reflected in the Third Schedule to that Act.”
Sir Albert was satisfied on the evidence before him that MPEC failed to take such materials as it had before it into account for had it done so it would not have made the salaries exempted from tax and thereby acted ultra vires its powers as provided for under section 69 (B) (2) of the Constitution.
“This award should be struck out.”
He said the position or status of the parliamentary caucus is a creature of party politics, consisting of members of the same political party or coalition of parties as is often the case in Solomon Islands within Parliament.
“It is supposedly separate and distinct from Parliament in terms of its roles and functions, being tied more to a political party or coalition of parties of the day.
“It is not accountable to Parliament per se and has no direct role in parliamentary business.
“No such position is catered for in the Constitution, in any other law or, Parliament and accordingly I am satisfied its inclusion by the MPEC is misconceived, without authority and also ultra vires.
The Claimants alleged that Regulation 3 is contrary to the provisions of the National Parliament Electoral Provisions Act on the grounds that a Member of Parliament does not officially take up his/her position until he/she has been declared a member under section 55 of the said Act.
The reference to section 33 of the Act in Regulation 3 is in error of law in that section 33 deals with the giving of notice of an election.
Sir Albert said this challenge can be shortly dealt with.
“The issue as to when a Member of Parliament is deemed elected is a question of law, which has been determined under section 55 of the National Parliament (Electoral Provisions ) Act (cap. 87). It follows that for purposes of calculating the commencement of payment of salaries and entitlements, these should be made effective from that date when the results are declared by the Returning Officer under section 55.
“It could be any other date or time and in seeking to extend the commencement date to the date of election as specified in section 33 of the National Parliament (Electoral Provisions) Act, the MPEC acted outside of its powers and ultra vires as well.
“This clause should also be struck out as unconstitutional and invalid.”
Private Lawyer Andrew Radclyffe was engaged by the Claimants while PEC, the body responsible for MPs awards and entitlements, engaged Sol-law.
The Attorney General is also a defendant in the case.
By ASSUMPTA BUCHANAN
