Treasury PS defends exemptions

The National Treasury has defended its decision to grant tax exemptions to specific companies operating under the Special Operating Framework Arrangements (SOFA), which are designed to stimulate industrial growth by addressing the manufacturing sector’s unique needs.

National Treasury Principal Secretary Chris Kiptoo, in a document submitted to MPs, stated that the law permits the government to provide such waivers to create a favourable environment for manufacturers looking to establish operations in Kenya.

Currently, three companies benefit from the SOFA arrangement: Positive Human Vaccine Manufacturing Company, Moderna Human Vaccine Manufacturing Company, which has yet to begin operations in Kenya, and Blue Nile Rolling Mills Limited, a producer of galvanized wire.

Tax exemptions

Kiptoo made these remarks during a session with the Delegated Legislation Committee, which is investigating the tax exemption granted to Blue Nile Rolling Mills Limited, based in Thika.

The exemptions were granted as the company was the first in Kenya to set up a galvanized iron wire manufacturing project, previously reliant on imports from countries like China, India, Egypt, and South Africa.

The inquiry was initiated by Kiambaa MP John Njuguna, who sought clarification on whether the tax exemption process adhered to legal requirements.

Kiptoo assured the committee, stating, “The requirements of the law in granting the tax exemptions under SOFA were fully complied with. The officials involved, including the Cabinet Secretary for the National Treasury and Planning and the Cabinet Secretary for the Ministry of Industry, Trade, and Cooperatives, both signed the SOFA agreement.”

In his briefing, Kiptoo explained that Blue Nile Rolling Mills Limited signed the SOFA deal with the government in 2022, which provided various tax waivers, including VAT exemptions, Railway Development Levy (RDL) waivers, and Import Declaration Fee (IDF) waivers on imports used for manufacturing galvanized iron. These incentives were aimed at encouraging the expansion of existing manufacturing operations and the establishment of new ones, leading to job creation.

The agreement, set to last for ten years from January 21, 2020, to 2030, granted the company these exemptions. Kiptoo further noted that, at the time of signing the SOFA, there were no other producers of galvanized wire in Kenya, though other companies have since entered the market.

“In 2022, Blue Nile Rolling Mills entered into a Special Operating Framework Agreement, where the government committed to providing various tax