Members of Parliament sitting in the Departmental Committee on Finance and National Planning have raised alarm about the unchecked tax expenditures forgone by firms registered under the Special Economic Zones (SEZ).
The MPs noted that the country could have lost millions due to incentives granted to the Special Economic Zones under the tax exemption programme.
This follows a concern which was raised by Mbeere North MP Geoffrey Ruku who highlighted that some developers and operators under SEZ could be missing to honour their tax obligations.
Following the concerns, the lawmakers have asked the Kenya Revenue Authority (KRA) to provide a report on all tax exemptions per each tax category of exempted taxes for all SEZ developers and operators for the last four years itemized per taxable transaction.
Moreover, the Departmental Committee on Finance and National Planning has asked KRA to provide details of tax paid per category by all the SEZ developers and operations for the last five years itemized per taxable transaction.
“There’s need for your two institutions to scale up the scrutiny of the financial statements from the firms operating under SEZ. I believe if everyone paid their fair share of taxes, we would not need to borrow or even overburden Kenyans with overtaxation,” the committee chairperson Kuria Kimani stated on Wednesday August 21, 2024.
KRA’s response
KRA’s Esther Wahome who represented the Commissioner General told the Committee that for the period between 2020-2023, a total of Ksh142,740, 821 in Corporation taxes were paid with Ksh173,884, 422 being taxes forgone.
MPs were not convinced by KRA explanation insisting that there is still a huge discrepancy between the taxes collected under Pay As You Earn (PAYE) and the Tax Exemptions granted to some companies operating under SEZ.
“Does KRA feel like these companies pay their fair share of revenue to the country? What is the tax exemption rate to the percentage of the GDP? Kigumo MP Joseph Munyoro posed.
In response, Wahome noted in cases the tax exemption seemed significant, KRA had sampled some of them for audit to check on compliance.
“Chair, we regularly sample a good number of these firms but only to ensure that they are compliant with regard to their tax obligations,” she stated.
Geoffrey Ruku pointed an accusing finger at KRA and SEZ for failing to iron out the issues to ensure tax compliance.
“Chairperson, most companies registered under SEZ are shell companies. I am very disappointed because the two entities entrusted with ensuring that companies operating under the SEZ meet their tax obligations, do not seem to have an idea on what is the tax obligation on each of these companies”, he noted.
Following the concerns, the MPs directed KRA and SEZ to reconcile their records and submit them to the Committee for further scrutiny within the week.
