The Members of Parliament (MPs) on Tuesday, May 7 gave the State Department on Investment Promotion and the Kenya Revenue Authority (KRA) one month to reconcile data on the amount of the tax incentives enjoyed by Special Economic Zone (SEZ) investors.
The Departmental Committee on Finance and National Planning made the pronouncement during the grilling of Principal Secretary (PS) State Department for Investment Promotion Abubakar Hassan Abubakar and the Chief Executive Officer of the Special Economic Zones Authority (SEZA) Kenneth Chelule Langat.
In a statement after the meeting, the Committee directed the PS and the CEO to submit the data before the deadline for scrutiny.
The Committee chaired by Molo lawmaker Kuria Kimani delved into the nature of businesses the over 56 firms operating in the 37 gazetted SEZs, were involved in.
Besides, they questioned why the impact of the firms had not been felt despite their initial capital investment estimated at USD 960,673,104 (Ksh128 billion).
“As a committee, we’re concerned about tax expenditures. We actually want to undertake a fact-finding mission to confirm for ourselves what business some of these entities are engaged in. We might be giving out huge tax exemptions without verifying if the beneficiaries are engaged in what they had indicated their intend to,” Kimani said.
MPs Spot Differences in KRA and SEZs Documents
This is after it emerged that the data provided by the KRA and the SEZs Authority failed to shed light on a number of questions raised by Members on the operations of SEZs.
The MPs spotted huge loopholes in the documents tabled before the Committee regarding the regulatory framework guiding the operations of certain entities operating under the SEZ.
According to the Committee, these inconsistencies may have denied the country the much-needed revenue.
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PS Abubakar explained that most of the entities indicated in the ministry records were still at the inception stage and were yet to take off.
“Most of the entities whose status is not validated are undertaking construction of their offices and are yet to start off their operations. For one to qualify to operate under SEZ, they have to acquire a licence, be tax compliant and have a tax code”, he explained.
The Committee sought clarification on a number of issues ranging from the discrepancies in the data provided by the State Department and KRA, the ongoing land and real estate transactions in some SEZs, to why some Zones seemed to have onboarded very many firms as compared to others.
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PS & CEO Plan to Stop Tax Evasion
PS Abubakar and CEO Langat acknowledged that there might be some loopholes exploited by some companies to evade tax and undertook to work closely with KRA to seal them.
They further pledged to explore legislative interventions that may be required to tighten the regulatory framework that guides the operations of SEZs.
The legislators asked the State Department to facilitate the provision of payroll records as well as the Pay As You Earn (PAYE) remittances records for audit by KRA.
The two were appearing before the Committee to offer insights into a response the Committee is generating towards a Statement sought by Mbeere North legislator Geoffrey Ruku regarding the operations of SEZs.
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