BY SAM ALFAN.
City lawyer Apollo Mboya has moved to court challenging exemptions granted by the government to a steel firm, which he says will see the country lose millions of revenue.
Mboya said the agreement between CS Trade and Investment and Blue Nile Rolling Mills ltd four years ago will see the government lose revenue of up to Sh188 million.
The lawyer now wants the government blocked from enforcing the Operating Framework Agreement (SOFA) dated 30th January 2020 and any subsequent amendment and or variation.
The lawyer said in court documents that he has approached the court with utmost national public interest in the wake of an economic crisis distressing all citizenry.
He said the provisions introducing and legitimizing such frameworks between the government and ‘special’ entities arbitrarily as it unjustifiably grants them blanket tax exemptions and reduced tax rates.
Mboya said the majority of Kenyans and manufacturers will suffer the effects of a dwindling economy with little reprieve owing to the continued and excessive loss of colossal amounts.
“Without a shred of doubt, CS Treasury and Trade and Investment, unless the conservatory orders sought herein are granted, will continue exempting companies from numerous taxes to the detriment of Kenyans,” he said.
Mboya added if the position is suspended, nothing that will be lost to both the government and Blue Nile Rolling Mills ltd since taxation is a burden that should be borne by every Kenyan in the country through a sound legislative process.
He said the continued application and or implementation of the regulations and the SOFA granting an unfair and unconstitutional advantage to Blue Nile Rolling Mills ltd against other steel manufacturers will imminently and undoubtedly sound a death knell on their businesses as the same will no longer be commercially viable owing to the extremely unfair and uncompetitive market resulting therefrom.
“In the inverse, where the interim relief is granted, Treasury ,Trade, KRA and AG will not suffer any prejudice whatsoever as where the Court finds the provisions on the Special Operating Framework Arrangement to be legal and Constitutional, the Blue Nile Rolling Mills ltd will enjoy the exemption granted,” he said.
He said the agreement has orchestrated the colossal loss of revenue to the government in the sum of Sh188.9 million.
This, he added, is happening at a time when the Country is fraught with unrest and uproar over economic hardship resulting from pilferage and mismanagement of government funds and resources and ballooning public debt.
Lawyer Mboya says the agreement was done by the arbitrary ,unprocedural and unconstitutional exemption from payment of Value Added Taxes, Customs Duty, Import Development Fund (IDF), Railway Development Levy (RDL), Export Investment and Promotion Levy (EIPL).
The agreement further will see the reduction of its income corporate tax to 10 percent in the importation of raw material in the manufacture of steel being billets and wire rods.
“The impugned legislation and the agreement also discriminately benefits one company against other steel manufacturing companies arbitrarily and unjustifiably granting it a price reduction of 47.5% and 62.5% in the importation of billets and wire rods respectively,” says lawyer Mboya.
He adds that the imminent closure of the said businesses will consequently lead to further loss of revenue to the government in terms of the colossal taxes collected therefrom estimated at Sh. 33.5 billion annually as well as loss of jobs to both skilled and unskilled labour of about 22,100 and 75,000 respectively which further accentuates the violation of Article 43 of the constitution.
Further, the effect of the exemptions will limit the choice of consumers to access quality products and erode their purchasing power contrary to Articles 46 and 43 of the constitution.
“The impugned legislations providing for the SOFA grant the CS Treasury and Trade and Investment the absolute and unfettered power and discretion to grant preferential tax rates and exemptions from national taxes in violation of the rights of other taxpayers and companies operating businesses in Kenya contrary to article 47 of the Constitution which promotes the right to fair administrative action that us lawful and reasonable.
“Since there was no governing framework on SOFA at the time of enacting the Finance Act 2018, CS Treasury illegally and in excess of executive powers and authority conferred, issued an illegal circular in 2018, Treasury Circular No.9/2018 dated 18th October 2018. The circular contained Guidelines/Framework for tax exemption, waiver, variation or remission on a national tax, a fee or a charge,” lawyer Mboya told the court.
He said the agreement provides that the firm would invest USD 19,000,000 in putting up a high-speed galvanizing factory in Kenya, create direct jobs for 300 people, empower 50 women in the local community, come up with development, innovation, and undertake technology transfer.
But Mboya said the information provided by the said Blue Nile Rolling Mills ltd was entirely false as can be deciphered from an Environmental Impact Assessment Report dated January 2108 conducted by the very same interest party on or about the same time in 2018.
Blue Nile Rolling Mills ltd Investment was in fact Sh. 700,000,000 which translates to USD 5,384,615, and it was to employ only 20 permanent and pensionable employees as per pages 49 and 50 of the report.
