11 July 2018

Kenya: MPs Link Rotich, Bett to Sugar Smuggling

Photo: Jeff Angote/Daily Nation
MPs Tindi Mwale (Butere), Ayub Savula (Lugari) and Justus Murunga (Matungu) at Parliament buildings on July 10, 2018 where they accused Treasury CS Henry Rotich of helping 14 companies evade tax on sugar.

Two MPs on Tuesday linked Treasury Cabinet Secretary Henry Rotich and former Agriculture CS Willy Bett to sugar smuggling.

Lugari MP Ayub Savula and his Matungu counterpart Justus Murunga said the pair's actions contributed to the loss of Sh10.6 billion in tax evasion.

The lawmakers accused Mr Rotich and Mr Bett of coercing Kenya Revenue Authority to clear a consignment imported by 14 companies after the expiry of an August 31, 2017 duty-free gazette notice.

The clearance, the lawmakers said, was done even after KRA opposed the move as it was in violation of the East Africa Community Customs Management Act.

The EAC law says import duty is to be paid at the rate in force at the time the goods are entered for home consumption.

DUTY-FREE

The MPs cited two letters Mr Bett and Mr Rotich wrote on September 12 and 21, 2017 respectively, well past the August 31 closure of the duty-free window.

"Interventions from the two led to a disagreement between KRA and the importers, which saw the taxman bow to pressure and release the sugar that was to be taxed 100 per cent," Mr Murunga said.

The companies involved are Flora Bakers, Piccadilly Holding, Landmark Freight Services, Darasa Investments, Pillarmatt and The Option Two.

Others are Ifox Commodity, Paleah Stores, Mapping Trading, Sukari Investments, Elon Commodities, Coast Terminal East Africa, Zack Petroleum and Export Trading Company Ltd.

The Sh10.6 billion is on top of the Sh36.5 billion the government lost in value added tax and import duty exemptions between May 12 and August 31, 2017, according to KRA.

FLOODING

The authority provided the information to the National Assembly Committee on Agriculture and Livestock and that of Trade, Industry and Cooperatives, which are investigating how contraband sugar got into the country.

According to the Lugari MP, the decision by Mr Bett and Mr Rotich led to the flooding of the Kenyan market with at least 71 million kilogrammes of sugar.

"There is no reason the two should be in office. If the President is serious about fighting corruption, he should dismiss them," Mr Savula said.

Mr Bett was early this year dropped from the cabinet and appointed Kenya's High Commissioner to India.

In the September 12 letter, Mr Bett said the delay in the arrival of the duty-free sugar in Mombasa was because of several reasons, including logistical difficulties, low tide, turbulent weather and delays at shipment ports.

DELAY

"Based on the circumstances that caused the delay, the lapsed duty-free window should not lock out the affected companies. Their sugar should be cleared duty-free," Mr Bett said.

Mr Rotich picked up the matter and ordered the release of the sugar nine days later.

"After due consideration, the National Treasury CS has...advised KRA to release the consignment as duty-free," he said.

This came even as KRA said it was experiencing difficulties implementing the directive.

"The consignments arrived after the expiry of the duty-free window, hence the application of the above mentioned provisions of the EACCM Act on such shipments," KRA commissioner in charge of customs and border control Julius Musyoki told Mr Rotich.

IMPORT DUTY

Mr Musyoki argued that the import duty had reverted to the East African Community Common Entrance Tariff.

However, upon realising that he may have broken the law, Mr Rotich, on October 4, 2017 issued a notice regularising the consignment and backdated it to September 29.

The notice stated that duty shall not be payable on the sugar which would have been loaded on a vessel between September 1, 2017 and December 31, 2017 destined to a port in Kenya.

The initial gazette notice allowing the importation of duty-free sugar was dated May 12, and was to expire on August 31, 2017.

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