The National Assembly has suspended consideration of a Bill that seeks to correct a printing error that saw the government controversially waive Sh15 billion in VAT exemptions to promote 14 manufacturing companies that control investments worth Sh93.53 billion.
Speaker of the National Assembly Moses Wetang'ula acceded to a request by Majority Leader Kimani Ichung'wah (Kikuyu MP) to shelve the government-sponsored VAT (Amendment) Bill 2025, citing the need to investigate whether exemptions on capital goods are commensurate with amounts invested locally.
Mr Ichung'wah told the House that the Finance and National Planning Committee, chaired by Molo MP Kuria Kimani, needed more time to carry out investigations into the nature of business the 14 companies had invested in the country to justify 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 actual investments that have been made in the country,” Mr Ichung’wah told the House.
The exemptions were granted at a time the government is struggling to raise revenue to finance its operations.
The Molo MP Kimani, the committee chairperson, said “it is not in the habit of the committee to try to slow any motion or Bill before this House”, adding that “we will always endeavour to complete the tasks assigned to the committee in the record time.”
“The Bill came to us as a correction of a Vellum error that may have occurred during the printing of the Tax Laws (Amendment) Act,” said Mr Kimani. “Although we have seen how change of policy has spurred manufacturing, it is important that we balance to make sure that the exemptions are used to spur local manufacturing and promote economic growth and that there is no possibility of abuse.”
The Tax Laws (Amendment) Act, which became operational on December 27, 2024, amended the first schedule of the VAT Act to provide that the exemptions be granted to an investment provided that its investment value is not less than Sh2 billion.
However, what concerned the MPs is the backdating of the Tax Laws Amendment Act to January 2024, which essentially made its application retrospective, “in contrast to the legislative principle”.
“This Bill is giving exemptions of Sh15 billion yet we are unable to raise money for the National Government-Constituency Development Fund and someone here is bringing here a Bill that wants to give exemptions,” Mr Junet Mohamed said of the Bill that was tabled by Mr Ichung’wah.
“The Bill needs to be scrutinised by the committee properly so that we know whether these investments have happened and if yes where they are and what value they give to Kenyans.”
A document submitted to the National Assembly by National Treasury Principal Secretary Chris Kiptoo lists 14 companies that have benefited from the exemptions before the law came into force.
“In accordance with the need to enhance transparency in the administration of tax incentives, we hereby submit the list of companies that have been granted approval of VAT exemption,” Dr Kiptoo said.
The VAT exemption beneficiaries include Devki Steel Mills that operates a mega steel project in Samburu and Kwale counties with VAT exemptions of Sh1.33 billion since March 7, 2023 for investments worth Sh8.32 billion.
The National Cement Company Limited with a Waste Heat Recovery Plant in Kaloleni, Kilifi County with exemptions of Sh516.5 million since November 28, 2024 for investments of Sh3.23 billion.
Devki Steel Mills with an Iron Ore Processing Plant in Voi, Taita Taveta County has had VAT exemptions of Sh1.1 billion since October 30, 2024 for investments of Sh6.9 billion.
National Cement Company Limited, a Cement Grinding Plant in Eldoret, Uasin Gishu County has had exemptions of Sh921.35 million since October 30, 2024 for investments of Sh5.8 billion.
There is also Soit Sugar Company Ltd that has had exemptions of Sh465.1 million since October 17, 2024 for investments worth Sh2.91 billion; Angata Sugar Mills limited Sh343.31 million since August 2, 2024 for investments worth Sh2.15 billion; and Rai cement Sh1.01 billion since October 1, 2024 for Sh6.34 billion worth of investments.
Taifa Gas Kenya limited has enjoyed VAT exemptions of Sh827.9 million since September 26, 2024 for capital investments of Sh5.2 billion; SBC Kenya limited got Sh643.2 million since August 28, 2024 for the Sh4.02 billion of investments; and De Heus Animal Nutrition limited Sh335.6 million since December 19, 2024 for investments worth Sh2.1 billion.
Others are DPL Festive limited Sh391 million since October 18, 2024 for investments worth Sh2.44 billion; Nakuru Mining Sh6.2 billion since August 18, 2023 for investments worth Sh38.74 billion; and Rainham Steel Plant limited Sh388.9 million since May 16, 2023 for investments of Sh2.43 million.
There is also CEMTECH Limited, a clinker grinding and production plant in West Pokot County, which has enjoyed exemptions of Sh488.74 million since March 7, 2023 for investments worth Sh3.1 billion.
MP Kimani assured the House of the committee’s commitment to scrutinise “these entities, including visiting them and knowing where they are, what they do and whether they have an actual impact on the economy”.
“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 (BAC), 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. “We should never allow exemptions that cannot be explained.”
He added, “These exemptions must be thoroughly scrutinised before the Bill is brought to this House.”
