House team shines spotlight on 2020 tax waiver for manufacturer

The Treasury and the Attorney General's office are under scrutiny over a decision made in 2019 to grant Blue Nile Rolling Mills Limited tax exemptions allegedly amounting to billions of shillings. 

Members of the National Assembly Committee on Delegated Legislation said the award was done against the law and without the involvement of Parliament, which is required to develop and pass laws to effect the tax exemption. 

But Treasury Principal Secretary Chris Kiptoo, who appeared before the committee, said that the law allows the government to provide waivers to foster a conducive environment for manufacturers who want to set up in the country.

He said three companies -- Positive Human Vaccine Manufacturing Company, Moderna Human Vaccine Manufacturing Company that is yet to begin operations in Kenya and Blue Nile that produces galvanized wire -- are currently enjoying the Special Operating Framework Arrangement (SOFA) arrangement.

Nile Rolling Mills is among companies that import or purchase goods locally under SOFA, an arrangement designed to stimulate industrial growth by addressing specific needs of the manufacturing sector. 

The PS said Blue Nile was granted the exemptions as it was the first company to set up a galvanized iron wire manufacturing project  locally, given that Kenya previously imported the commodities from China, India, Egypt, South Africa and other countries.

“The requirements of the law in granting the tax exemptions under SOFA were complied with. The people that were involved in granting the tax exemptions were the Treasury Cabinet Secretary and his Trade and Industry counterpart. They both signed the SOFA,” he said.

The MPs had shone the spotlight on the waivers, and questioned the rationale and procedure of granting the relief.

“You have made reference to some gazette notice that was signed. Where is that gazette notice? Is this act an Act of Parliament of Kenya?” asked committee chair Samuel Chepkong’a. 

It also emerged that the document relied on by the Treasury to issue the exemptions was not “domesticated” and aligned to the East African Community Act.

“Article 2 of our Constitution recognises international treaties, which is fine, and you have one from Tanzania, but there is a process. We just don’t adopt them in a blanket manner, they have to pass through Parliament for adoption," said Nyando MP Jared Otieno. 

The committee further sought to know why Treasury reviewed fiscal laws to favour certain companies.

“...you signed an agreement with this company (Blue Nile) on December 18, 2019 then you have a further agreement which is an amendment to this other agreement which was signed on January 16, 2020. We would like to see documentation," said Chepkong'a. 

The committee also inquired on what advise the office of the Attorney General had issued on the matter.

The committee began the probe into operations of the company following a request for a statement by Kiambaa MP John Njuguna on July 31, this year.

The legislator had argued that the granting of the tax exemptions to select companies threatened the sustainability of the local steel production industry by “giving undue advantage to a few competitors.”