Taxman: We lost Sh36 billion in taxes due to sugar imports

KRA Commissioner General John Njiraini (right) with Commissioner Julius Musyoki and when they appeared before MPs on Tuesday.[Boniface Okendo, Standard]

The Government lost Sh36 billion in taxes during the duty-free window for sugar imports last year.

The amount is enough to fund free education for three financial years.

Apart from the Government losing taxes, some importers took advantage of the period and shipped in 90 blocks of narcotic substances.

Treasury had issued a gazette notice 4536 allowing the importation of duty free sugar between October and December last year, following prolonged drought in sugar growing zones. 

The gazette notice did not specify the quality or quantity of sugar to be shipped into the country. It also allowed everyone, including unlicensed firms, to do the importation.

It is through this window that Kenya Revenue Authority (KRA) now admits that it lost up to Sh36.4 billion in taxes.

More revelations will be made today when the joint committee of Agriculture and Trade tables a report on the floor of the House this afternoon following a six-day probe.

According to KRA, 113 large importers shipped in 818,151 metric tonnes of duty free brown sugar into the country. 13 small scale traders imported 185 metric tonnes.

Kenya Revenue Authority Director General John Njiraini told the MPs that investigations into whether narcotic substances were included in the imports were going on.

Suspected narcotics

He told the committee that four suspected unsealed polypropylene bags were found concealed inside bags of sugar imported by a company registered in Uganda.

“The 90 blocks suspected to be narcotics were marked as exhibits and packed in evidence bags and detained by the Anti-Narcotics Police Unit. Currently the matter is being handled by the relevant government agency,” said Mr Njiraini.

The Taxman also told the committee that raw cane sugar imported under the exemption regime was presented to customs in 50 kilogram bags and in un-bagged bulk carriers.

The KRA boss told the Kanini Kega (Kieni) and Adan Haji (Mandera South)-led committee that the release of any imported sugar was clearance by relevant regulatory authorities.

“In all cases where un-bagged sugar was imported, all regulatory agencies including Kenya Bureau of Standards (Kebs), Port Health and Radiation Board certified the consignments as fit for importation,” he said.

Exemption deadline

Upon expiry of the initial tax exemption deadline, KRA received requests to facilitate duty free entry of sugar whose arrival was said to have been delayed by various logistical challenges.

Njiraini told the committee that KRA advised the National Treasury of its inability to admit the sugar on duty free basis given the strict timelines.

“KRA intercepted 40,000 metric tonnes of brown sugar purported to have been originated from Brazil and declared to have been loaded within the gazette notice while conducting due diligence to ensure that only sugar that met the requirements specified in the Gazette Notices 4536,” said Njiraini.

He said the authority declined to allow the importation on duty free basis and demanded Sh2.5 billion in taxes.

The importer objected to the demand and filed a case in court which is still ongoing at Supreme Court.