State defends tax waivers to select companies amid audit probe

The government has justified granting tax waivers to select companies as Parliament initiates an audit to determine if the process was legally compliant.

In a document presented to Parliament, Treasury Principal Secretary Chris Kiptoo explained that the law permits these waivers, particularly in cases where the nation is expected to benefit from the resulting investments.

The PS was addressing an inquiry by the National Assembly's Committee on Delegated Legislation, which is investigating the circumstances under which Thika-based Blue Nile Rolling Mills Limited was granted a tax exemption.

The inquiry stemmed from a question by Kiambaa MP John Njuguna who had sought a statement on the tax exemptions.

Njuguna informed the House that under the 2020 Special Operating Framework Arrangement (SOFA), the company signed an agreement with the government that exempts it from paying corporate income tax of up to 10 per cent.

The agreement also provided the company with exemptions from paying Value Added Tax (VAT), import duty, Import Declaration Fee (IDF), and Railway Development Levy (RDL) on raw materials for five years.

The lawmaker argued that the government has been denied revenue as a result of the exemptions.

"It is against this background that I request the Committee to inquire into the operations of the Blue Nile Steel Rolling Mills Limited and present a report to the House, making relevant recommendations thereof," Njuguna said.

Lawful

In his response to the Delegated Legislation Committee, the PS denied any wrongdoing, stating that the deal was structured in accordance with existing regulations and laws, including regional treaties.

The Committee is chaired by Ainabkoi MP Samuel Chepkonga.

"In the year 2018, the Government amended tax laws through the Finance Act, 2018 – Value Added Tax and Miscellaneous Fees and Levies Act to provide tax incentives for Special Operating Framework Agreement with the Government," Kiptoo said.

The PS also mentioned that in 2023, the Attorney General approved the deal after the ministry sought a legal opinion.

"The Attorney General advised that Blue Nile Rolling Mills Limited be exempt from the new taxes and levies that undermine implementation of the SOFA," Kiptoo said.

The PS, however, did not disclose the total value of tax exemptions granted to the company so far, nor the amount expected by the end of the agreement.

According to Kiptoo, the ministry had not consulted the Kenya Revenue Authority (KRA) to determine the value of these tax exemptions.

"Actual total values of taxes, fees and levies including import duty that has been exempted so far will be provided later after consultation with Kenya Revenue Authority (KRA)," he explained.