Parliament has kicked off investigations into 14 local manufacturing companies exempted from paying up to Sh15 billion in value-added tax(VAT) at a time when the country is struggling to meet its revenue collection targets.
The Finance and National Planning Committee of the National Assembly chaired by Molo MP Kuria Kimani said that the investigations will establish whether or not the companies merited the exemptions even as House Speaker Moses Wetang’ula granted a request to suspend consideration of a Bill on the waivers.
This came as it emerged that the 14 manufacturing companies with a claimed cumulative capital investment of Sh93.53 billion face questions on the exemptions granted.
The beneficiaries of the VAT exemptions include Devki Steel Mills, which operates a mega project in Kwale County. The firm raked in VAT exemptions of Sh1.33 billion since March 7, 2023, for investments worth Sh8.32 billion.
The National Cement Company Limited, which has a Waste Heat Recovery Plant in Kaloleni, Kilifi County, got Sh516.5 million in waivers since November 28, 2024, for investments of Sh3.23 billion.
A report by National Treasury Principal Secretary Chris Kiptoo also lists Devki Steel Mills, an iron ore processing plant in Voi, Taita Taveta County, as having received VAT waivers of Sh1.1 billion since October 30, 2024, for investments of Sh6.9 billion.
National Cement Company Limited’s grinding plant in Eldoret, Uasin Gishu County, has had exemptions of Sh921.35 million since October 30, 2024, for investments of Sh5.8 billion.
The documents indicate that Soit Sugar Company Ltd has had exemptions of Sh465.1 million since October 17, 2024, for investments worth Sh2.91 billion while Angata Sugar Mills Limited got Sh343.31 million since August 2, 2024, for investments worth Sh2.15 billion. On its part, Rai Cement got exemptions of Sh1.01 billion since October 1, 2024, for Sh6.34 billion worth of investments.
There is also Taifa Gas Kenya Limited, which has enjoyed VAT exemptions of Sh827.9 million since September 26, 2024, for capital investments of Sh5.2 billion while SBC Kenya Limited was allowed Sh643.2 million since August 28, 2024, for Sh4.02 billion of investments. The document also lists De Heus Animal Nutrition Limited as having invested Sh2.1 billion and was exempted from paying Sh335.6 million since December 19, 2024.
The others include DPL Festive Limited’s Sh391 million exemptions since October 18, 2024, for investments worth Sh2.44 billion; Nakuru Mining Sh6.2 billion since August 18, 2023, for investments of Sh38.74 billion; Rainham Steel Plant Limited Sh388.9 million since May 16, 2023, for investments of Sh2.43 million.
Also mentioned is CEMTECH Limited, a clinker grinding and production plant in West Pokot County that has enjoyed exemptions of Sh488.74 million since March 7, 2023 for investing Sh3.1 billion.
Leader of Majority in the National Assembly Kimani Ichung’wah told the House that the Finance and National Planning Committee needed more time to undertake investigations on the nature of business the 14 companies have invested in the country to warrant the “huge” VAT exemptions.
“The committee needs to establish the exact quantum of what is sought to be exempted and the beneficiaries of those exemptions and also to ascertain that they are indeed actual investments that have been made in the country,” Mr Ichung’wah told MPs.
The VAT (Amendment) Bill 2025 seeks to rectify a printing error that has seen the government controversially grant VAT exemptions to some local manufacturing companies.
The Tax Laws (Amendment) Act, which became operational on December 27, 2024, amended the first schedule of the VAT Act to provide that exemptions be granted to an investment provided that its value is not less than Sh2 billion.
However, what concerned the MPs was the backdating of the Tax Laws Amendment Act to January 2024, which essentially made its application retrospective, “in contrast to the legislative principle.”
The Molo MP assured the House of his committee’s commitment to scrutinise “these entities including visiting them to know where they are, what they do and whether they have an actual impact on the economy.”
“However, tax policies that enhance local manufacturing have actually been proven to have a positive impact — creating local employment, promoting local manufacturing, and spurring economic growth. But it is very important that we scrutinise the exemptions so that they are not subject to abuse,” said the Molo MP.
But even as Mr Kimani gave the assurance, Alego Usonga MP Samuel Atandi, the chairperson of the Budget and Appropriations Committee, warned that a Parliamentary Budget Office (PBO) report has shown that tax exemptions have seen the country lose over Sh300 billion in the current financial year.
“It will be bad for this House if we continue to do the same knowing very well that we are unable to raise revenues. We are projecting to raise Sh2.8 trillion in ordinary revenue in the next financial year. We will never achieve this with these exemptions,” said Mr Atandi.
He went on to “beseech this House that in future, we should never allow exemptions that cannot be explained.”
Mr Atandi added: “These exemptions must be thoroughly scrutinised before the Bill is brought to this House.”
