The National Treasury has defended its decision to waive Sh104 million in import levies for Mombasa Sugar Refinery, insisting the incentive was granted to expand local industrial sugar production, create jobs and support manufacturing rather than offer preferential treatment to a private company.
Appearing before the National Assembly Committee on Trade, Industry and Cooperatives on Tuesday, Treasury Cabinet Secretary John Mbadi said the exemption from the Import Declaration Fee (IDF) and Railway Development Levy (RDL) was approved after consultations involving the National Treasury, the ministries responsible for Agriculture and Trade, together with other government agencies.
Mbadi said the tax relief was granted under the provisions of the Miscellaneous Fees and Levies Act, which allows the Cabinet Secretary to exempt goods where such a decision is deemed to be in the public interest.
"The exemption from import declaration fee and railway development levy was granted pursuant to the relevant provisions of the Miscellaneous Fees and Levies Act," Mbadi said. "The provisions empower the Cabinet Secretary to exempt goods where the exemption is considered to be in the public interest."
He told the committee that Mombasa Sugar Refinery, previously operating as Kibos Sugar Refinery before relocating to Mombasa, sought the waiver to facilitate the importation of raw sugar for refining into food-grade and pharmaceutical-grade industrial sugar.
According to Mbadi, the proposal received backing from the Ministry of Agriculture and Livestock Development and the Ministry of Investments, Trade and Industry, which advised that the incentive would increase local value addition and strengthen the country's supply of industrial sugar.
"It is not just the request of Mombasa Sugar Refinery that informed the approval, but also because there was a strong recommendation from the State Departments under the Ministry of Agriculture and Livestock and the Ministry of Investments, Trade and Industry," he said.
The Kenya Revenue Authority estimated the tax relief at Sh104.09 million, covering the Import Declaration Fee and Railway Development Levy that would otherwise have been collected.
Mbadi said the Treasury considered the expected economic benefits before approving the exemption, saying the move was intended to support local refining and reduce dependence on imported finished industrial sugar.
"The anticipated benefits included creation of direct and indirect employment opportunities, transfer of knowledge and technical skills, utilization of installed domestic refining capacity, local value addition, provision of a local source of industrial sugar, and reduction of reliance on imports of finished industrial sugar," he said.
He said the waiver was issued on condition that the imported raw sugar would only be refined for industrial use.
"Where the condition was not complied with, the exempted import declaration fee and railway development levy, together with the applicable penalties and interest, would become payable," Mbadi told the committee.
Mbadi said compliance is being monitored by a multi-agency team led by the Kenya Sugar Board, which oversees the importation, release, processing and utilization of the raw sugar. He added that while the Kenya Revenue Authority is responsible for customs enforcement, the Kenya Sugar Board ensures the consignment is not diverted into the local consumer market.
He maintained that any importer found to have violated the conditions attached to the exemption would be required to pay the waived taxes together with the applicable penalties and interest.