Lawyer Apollo Mboya has sued the government over an exemption he now argues has given one manufacturer a loophole to avoid paying Sh188 billion in taxes, denying the country revenue and creating an uneven playing field in the steel industry.
The lawyer claims that Blue Nile Rolling Mills, which has allegedly gotten a Sh188 billion tax relief over four years, falsified information to get its exemption.
Mr Mboya in his suit papers wants the High Court to quash the Special Operating Framework Agreement (SOFA), which allows the National Treasury to grant tax exemptions to firms that meet certain conditions.
In his suit papers, Mr Mboya holds that Blue Nile Rolling Mills Ltd was granted a 10-year exemption on import taxes and that the move has seen Kenya lose out on Sh188 billion in just under four years while giving the firm an unfair advantage over other industry players.
Through Okwach & Company Advocates, he has sued the National Treasury, National Assembly, the Trade and Industrialisation Ministry, the Kenya Revenue Authority and the Attorney-General.
Blue Nile Rolling Mills, Devki Steel Mills, Kenya Association of Manufacturers, Kituo cha Sheria, Competition Authority of Kenya, Katiba Institute, Busia Senator Okiya Omtatah and the Law Society of Kenya have been listed as interested parties in the suit.
Mr Mboya has also filed an application to temporarily halt the implementation of the SOFA pending the final determination of his case.
He says that failure to issue stop orders could see the government extend similar tax exemptions to other companies, at a time when the country is struggling to raise funds for development and debt repayment.
The lawyer holds that Blue Nile pitched a project to the Treasury in which the firm would invest $19 million (Sh2.4 billion) in putting up a high-speed galvanizing factory in Kenya and create 300 jobs while empowering at least 50 women.
But the firm invested Sh700 million with 20 permanent and pensionable jobs created, the court papers say. The information, he adds, is contained in an environmental impact assessment of the Blue Nile Rolling Mills project.
Mr Mboya argues that the SOFA was introduced without the involvement of Parliament.
Mr Mboya now argues that the circular was also illegally introduced as it was not subjected to Parliament and that the terms and conditions governing the SOFA are vague and give the Treasury unlimited powers to grant blanket tax exemptions.
“The 1st interested party’s (Blue Nile Rolling Mills) investment was in fact Sh700 million which translates to $5.3 million, and it was to employ only 20 permanent and pensionable employees as per pages 49 and 50 of the report,” Mr Mboya says in court papers.
Following the exemptions, Blue Nile Rolling Mills allegedly got a 47.5 per cent reduction of its importation costs for steel billets, and 62.5 per cent off wire rods acquisition.
“…With the net effect that its finished product is sold grossly cheaper than the general market price at the suffering of other steel manufacturers. The consequence of this is the creation of a monopoly in the steel manufacturing industry, being the 1st interested party (Blue Nile Rolling Mills). Further, if the unfair advantage is allowed to continue, it will certainly cause the collapse of more than 99 manufacturers…,” Mr Mboya further says in his court papers.
Neither the respondents nor interested parties have filed responses to the suit.
Following that amendment, Blue Nile Rolling Mills successfully applied for exemptions on customs duty, VAT, import declaration fee, railway development levy for wire rods and export investment promotion levy for wire rods.
