Nairobi — Eyebrows have been raised on how imported refined edible palm oil disguised as crude palm oil entered the port of Mombasa in a bid to evade taxes.
The country is estimated to have lost Sh62 billion in revenue tax for the last three years as the importation of the product largely from Malaysia and Indonesia gained entry at the Mombasa Port.
The imported refined oil was intended for use in the East African Community (EAC) countries of Kenya, Uganda, Tanzania and Rwanda.
Imported refined palm oil is charged 35 percent duty while semi refined palm oil attracting 10 percent duty.
The product also attracts Import Declaration Fee (IDF) at the rate of 2.5 percent, Railway Development Levy of 1.5 percent and Value Added Tax (VAT) 16 percent.
Documents before parliament show that the product imported by Louis Dreyfus Company (LDC) was a blending of 60 percent crude palm oil with refined palm oil of 40 percent which is then declared as crude palm oil.
In 2022 the government lost Sh16.5 billion in revenue from the 233,000 metric tonnes that were misdeclared as crude palm oil and Sh32.54 billion in 2023 from the 387,868 metric tonnes misdeclared.
In 2024 the government has already lost Sh13.83 billion in revenue from the 163,567 metric tonnes imported so far.
"They load both cargos into the same ship tanks using a 40 percent refined oil blend and 60 percent crude oil blend. This is against the World Customs Organization guidelines as any adulterated cargo cannot be deemed as crude oil palm oil," the documents read.
Details have emerged that LDC that has no contacts on its website and the available telephone numbers could not go through is among the entities. Most firms misdeclare refined edible palm oil to evade paying the required taxes to the taxman.
"The product at the destination country requires less processing or none at all thus their customers save on processing costs," the documents read.
The palm oil cargo imported from Malaysia and Indonesia, the world's two leading exporters of palm oil products that accounts for 85 percent of the production, is in six types- RBD Palm Olein, RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and palm fatty acid distillate.
Palm oil stearin is a by-product of palm oil refining as is used in soaps manufacture and cooking fats. RBD Palm Olein is the refined palm oil, Crude palm kernel oil is by-product that is used in soap manufacturing.
Crude palm olein is palm oil that has been semi processed, which means that it has only been fractioned to separate the liquid portion from the solid portion of oil and attracts import duty at the rate of 10 percent.
Crude palm oil is unprocessed oil which requires full processing. Palm fatty acid distillate is a by-product of palm oil refining and is used to make brown soaps.
This means that were the product to be imported in crude form, the country would benefit as the by-products from the refined oil would help the soap manufacturing among others.
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To promote local value addition, Indonesia and Malaysia have imposed a $70 per ton of Crude Palm Oil exports with no export duty on refined palm oil.
This means that the importers of the product save the $70 per ton duty when exporting refined palm oil from Indonesia or Malaysia and 35 percent import duty when declaring the cargo as crude palm oil in Kenya.
Because the oil is blended the local processing costs are reduced as such the companies stand to benefit more as the government losses.
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