Members of the National Assembly Committee on Delegated Legislation have raised concerns after it was revealed that the Blue Nile Rolling Mills Limited, a steel manufacturer company, was unfairly granted tax exemptions.
Representatives of National Treasury Principal Secretary Dr. Chris Kiptoo on Tuesday August 13 appeared before the committee to explain the exemptions but failed to provide satisfactory answers.
This followed a request by Kiambaa MP John Njuguna on July 31 for details about the tax exemptions granted under the Special Operating Framework Agreement (SOFA).
SOFA is a framework that allows an entity- once approved, to import a specific quantity of raw material duty free.
The details were to include the total value of tax exempted to date, as well the estimated value of the tax exemptions that the company will have received at the end of the 5-year period.
Taxes Blue Nile Rolling Mills is Exempted
The lawmaker told the House that the SOFA agreement that Blue Nile signed with the government in the year 2020, exempts the company from paying income corporate Tax for up to 10% in addition to further exemptions on Value Added Tax (VAT), Import Duty, Import Declaration Fees (IDF) and Railway Development Levy (RDL) on raw material imports for 5 years.
In his request, Njuguna emphasized that the tax exemption has denied the Government much needed tax revenue estimated at Ksh 30 billion annually at a time when the country is struggling to collect revenue to fund its budget.
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Furthermore, the MP stated that the exemptions given to Blue Nile Limited threaten the sustainability of the local steel production industry as it creates unfair competition for local competitors who are at risk of closing down due to their inability to compete with the steal miller’s low prices.
“Honourable Speaker, the Law provides that tax exemptions under SOFA agreements can only be granted to companies incorporated for purposes of manufacturing Vaccines or whose capital investment is at least Ksh 10 billion. Blue Nile does not fall in any of the two categories,” Njuguna said.
“It is against this background that I request the Committee to inquire into the operations of Blue Nile Steel Rolling Mills Limited and present a report to the House, making relevant recommendations thereof.”
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Treasury Representatives Fail to Explain Value of Tax Exempted
Musa Kathanje, Director of Macro and Fiscal Affairs at the Treasury, who led the officials in presenting the case informed the committee that the tax incentives for Blue Nile Rolling Mills Limited were granted in 2020, with the expectation that the firm would create jobs and boost exports.
However, the officials struggled to provide comprehensive details about the agreement, including the exact amount of tax relief granted.
The lack of detailed information prompted committee members to express concerns about the adequacy of the responses provided. Consequently, members of the Committee on Delegated Legislation now want National Treasury PS Dr. Chris Kiptoo to personally appear before them and clarify the reasons behind the granting of tax exemptions to Blue Nile Rolling Mills Limited.
“It is clear that you do not have the necessary details or the comprehensive answers we require. As a committee, we want to meet with PS Kiptoo in person to obtain the answers we need regarding the Blue Nile Rolling Mills SOFA deal,” said the Committee chair Samuel Chepkonga.
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