The company was exempted from paying Income Corporate Tax for up to 10 per cent for the last three years. This was in addition to further exemptions on Value Added Tax, Import Duty, Import Declaration Fees (IDF) and Railway Development Levy (RDL) on raw material imports for 10 years an agreement that many manufacturers have lamented destabilised the steel Industry.
From the documents seen by kenyan hour, shows the gazette notice the officials relied on was not domesticated and was yet to be placed under the EAC 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 to be domesticated so that is where we are coming from’ – said MP Jared Otieno during grilling
When the Committee members raised questions on how much money Blue Nile had benefited from in tax exemptions, the Treasury officials diverted the matter to the Kenya Revenue Authority despite earlier claiming to have the figures.
They further did not have any documentation to back their claims that the company complied with all the requirements needed for a company to be awarded the Special Operating arrangement.
Treasury officials were also unable to explain how the agreement with Blue Nile had benefitted the Country as their claim that the company had ring fenced the export of galvanised wires remained unsubstantiated, as there were no relevant documentation to back their statement.
“For a company to be awarded the SOFA arrangement, majority of the employees must be of Kenyan origin, the officials that came before the committee claimed that the company had 1,000 employees, however evidence has shown that only 300 were Kenyans,” read part of the submissions.
Further the company is required to have an operating capital of Sh10 billion but Blue Nile was seemingly favoured as its capital was stated to be Sh2.5 billion.
A petitioner, conman and opportunist Lawyer Apollo Mboya has moved to court to stop the exemption of steel manufacturer Blue Nile Rolling Mills Limited from paying taxes.
Lawyer Apollo Mboya says the exemption was arbitrary, unprocedural and unconstitutional because it discriminated other players in the industry.
The National Assembly, Cabinet secretaries for Treasury and Trade and their Principal Secretaries have been listed as the first to fifth respondents respectively.
Mboya has also sued the Kenya Revenue Authority and the Attorney General with Blue Nile Rolling Mills Limited listed as an interested party in the public interest petition.
The government in 2022 exempted the company from paying all duties, levies and value added tax in an arrangement known as special operating framework agreement.
The petitioner says the CSs granted the exemption yet they did not have any power to do so. The move, Mboya claims, has cost the country billions in unpaid taxes.
“One of these creatures is the agreement between the CS Treasury, CS Trade and Industry and Blue Nile Rolling Mills Limited dated January 30, 2020, that has orchestrated the colossal loss of revenue to the government in the sum of Sh188,957,415,195 and counting, at a time the country is fraught with unrest and economic hardship resulting from pilferage and mismanagement of government funds and resources.”
Through the special operating framework agreement, the government has unjustifiably granted blanket tax exemptions and reduced tax rates to entities without public participation.
In his prayers to the High Court, Mboya wants a conservatory order issued to suspend the implementation of the agreement.
The exemption has also created an unfair competitive advantage to Blue Nile and is likely to push other players out of the market.
With the tax exemption, the galvanised wire manufacturer enjoys importing raw materials at a price that is 47 per cent cheaper for billets and 62 per cent cheaper for wire rods compared to other steel manufacturers.
“The imminent closure of the said businesses will consequently lead to further loss of revenue to the government as well as loss of jobs to both skilled and unskilled labour of about 22,100 and 75,000 respectively.”
KenyanHour 