Parliament to probe Uhuru-era tax waivers

A Parliamentary Committee has begun investigations into the decision by the administration of former President Uhuru Kenyatta to grant tax waivers to companies during his reign as President.

This week, the National Assembly’s Finance Committee summoned companies said to have received the waivers, some amounting to hundreds of millions of shillings.

The waivers, the committee said, are believed to have been authorised by the National Treasury, a move they said denied the Kenya Revenue Authority the opportunity to collect taxes.

First to appear before the committee chaired by Molo MP Kimani Kuria was managing a liquor manufacturing firm – London Distillers Limited – over a Sh332 million tax abandonment granted by the National Treasury in 2021.

London Distillers Limited management is among those being investigated over irregular tax waivers granted by the National Treasury and the Kenya Revenue Authority (KRA). 

Earlier, the committee resolved to undertake the probe when during the review of the performance of KRA and the implementation of the Excise Duty (Excisable Goods Management (Amendment) Regulations, 2023, among other tax heads, they noted a massive tax abandonment granted by government officials.

London Distillers Director Mohans Galot.

LDK Ltd management, led by its chairman, Mohan Galot, told the committee that a raft of challenges, among them poor business performance and nonpayment by their distributors due to the effects of Covid-19, led to their application for tax abandonment with success.

They revealed to members that the then Treasury Cabinet Secretary, convinced by the firm’s plight, also waived 100 percent interest and penalties accrued from the unpaid excise duty. 

They were asked to pay Sh80 million, representing 20% of the total tax owed (Sh400 million) which they promptly paid. 

The company officials further blamed dealers of illicit brew whom they observed had dealt their business a dead blow.

They told the Committee that currently, the company is operating at a loss, having halted business due to a lack of molasses, their key ingredient, after sugar factories across the country closed down to undertake regular maintenance for four months. 

Further, the officials told members that in March this year, the National Treasury wrote informing them that their request for tax abandonment had been revoked. They were required to engage with KRA to discuss how they would settle the balance totalling to Sh 332 million. 

According to the company’s senior manager Emma Opondo, they have since paid Sh95 million.

However, Kuria noted that excise duty is taxpayers’ money held by the company on behalf of KRA as a result of the declaration of sale made by the company. 

“Excise duty is money you collect as an agent of KRA. You only generate that levy when you declare you have made a sale. Therefore, Why would you seek abandonment of monies you have declared sale for? If every company in Kenya made an excuse like yours, would anyone honour tax obligations?” Kuria asked.

Members further observed that during the Covid-19 pandemic, the worst-hit businesses did not include firms dealing with alcoholic drinks but hotels and restaurants, which the lawmakers noted were not among those who had applied for tax waivers.