Chinese contractor exempted from taxes

The Kenyan government on Feb 4 announced that China Road and Bridge Corp, contractor for a standard gauge railway line from Mombasa to Nairobi, will be exempted from value added tax and other levies on building materials, used on the railway.

Kenya's National Treasury will absorb the tax costs while the Kenya Revenue Authority will collect the monies and submit them to the exchequer. National Treasury Deputy Director of Economic Affairs Wanyambura Mwambia made the announcement at a workshop for suppliers to the project.

Mwambia said the move was important in averting the risk of the contractor not complying with VAT rules. KRA Commissioner General John Njiraini, however, warned the contractor that it might face severe sanctions if it does not prevent leaks of exempted supplies.

Suppliers are required to register for what is one of the flagship projects of Kenya's Vision 2030.

Njiriani said the government will use high-level electronic tracking for the rail supplies entering the country. He said high-risk materials such as cement should be repackaged in clearly marked bags to avoid unscrupulous trading.

"We will also use the i-Tax electronic declaration system to track information on SGR supplies. All SGR suppliers must be registered with i-Tax," Njiriani said.

The move is temporary because the government is working on a better way to ensure the SGR project runs smoothly, he said. Because the government-to-government SGR agreement was inked after the VAT Act 2013 came into force, Kenya had no choice but to pay the VAT.

"As Kenya implements more and more ambitious projects in its quest to become a middle-income country, the need will arise to continually review tax processes to match the new demands," he said.

The Kenyan government in June introduced the Railway Development Levy on all imports to help build the new rail line. China Exim Bank is financing 90 percent of the $8 billion project while Kenya is paying 10 percent.

Ministry of Lands Cabinet Secretary Charity Ngilu met National Land Commission officials and leaders from Makueni County in a three-hour closed meeting on land compensation for residents along the rail route.

Ngilu said the forum was to inform leaders on how the compensation program was put in place and how people to be compensated were identified. National Land Commission Chairman Muhamad Swazuri said Makueni leaders needed to know details of the project and issues dealing with sand harvesting and roads damaged by the project.

However, the leaders, led by Makueni Senator Mutula Kilonzo Junior and Makueni Member of Parliament Daniel Maanzo, said the meeting was only a reaction to residents' opposition to compulsory land acquisition and that no agreement was reached.

"You cannot give somebody (land owner) a block figure and say I have given you 2 million Kenyan shillings ($21,800) and yet that person has said my land has got trees, my land has got a house. We have insisted that you give them the details. Information is power. The people of Makueni are entitled to all the information," Kilonzo said after the meeting.

(China Daily Africa Weekly 02/06/2015 page20)