The Committee on Delegated Legislation, led by Ainabkoi MP Samuel Chepkong’a, has uncovered a potential tax evasion scheme involving a steel manufacturing company.
The issue came to light today during the committee’s investigation into an alleged illegal tax exemption granted to Blue Nile Rolling Mills Limited.
The committee learned from senior National Treasury officials representing PS Dr. Chris Kiptoo that parliamentary approval was not sought for the tax exemption deal.
The firm received over Sh1 billion in tax relief under the Special Operating Framework Arrangement (SOFA) agreed with the government in 2018.
The session was adjourned following the revelations.
“Can you prove that you tabled this agreement for tax exemption? If it restricts competition, it falls under statutory instruments,” questioned Chepkonga.He added: “Where is this instrument presented to parliament? How was it transmitted? Has it ever been brought to parliament?”
Musa Kathanje, Director of Macro and Fiscal Affairs, admitted that the Treasury may have bypassed the National Assembly.
“I am advised we do not have evidence of it being brought before the National Assembly, unless from the Ministry of Industry,” said Kathanje.The committee members sought details from the National Treasury about the terms of engagement with the steel company and the legal basis for the tax relief. They noted that the company appeared to be shielded from the effects of subsequent Finance Act reviews.
“Why is only Blue Nile benefiting from the SOFA tax relief? Were there other applicants, and what happened to them? We cannot create laws that control competition; they must be open to all,” asked Nyando MP Jared Okello.Documents presented to the committee revealed that the company received a total tax relief of Ksh. 1.18 billion between 2020 and 2024. The breakdown is as follows: Ksh. 56.7 million, Ksh. 182.9 million, Ksh. 327.6 million, Ksh. 528.1 million, and Ksh. 290.5 million.
“The amendments show that a Special Operating Framework Arrangement is not an agreement. I do not understand how a private company could receive a tax exemption through an agreement rather than a legal provision,” said the committee chairperson.Concerned about the impact on national revenue, committee members hinted at a review of the SOFA framework to address potential illegalities.
“The evidence shows significant illegality in this agreement. Kenya needs all possible tax revenue. We are in a serious revenue problem,” said Mbeere North MP Geoffery Ruku.According to the Treasury team, only three companies have been exempted under the SOFA framework: POSTIVO, intended for motherboard manufacturing but which did not proceed, and MORDERNA, intended for vaccine production.
Further discrepancies were uncovered by Committee Vice Chairman Hon. Robert Gichimu (Gichugu), who noted contradictions in the dates of the agreement’s amendments and observed that the agreement seemed to be entered into before it was signed.
“You cannot apply a law retrospectively to an agreement signed earlier,” said Gichimu.
The committee also criticized the confidentiality surrounding the deal, which appeared to exclude Parliament from oversight. “You are excluding Parliament from examining this document. This is unconstitutional,” said Chepkonga.Treasury officials struggled to explain a clause that subjected the company only to laws not affecting its incentives. The tax relief covered VAT, Import Declaration Fee (IDF), and Railway Development Levy (RDL) on imported raw materials used to manufacture galvanized wires.
