MPs Send Away KRA Boss Over Sh62B Tax Evasion Dossier

Kenya Revenue Authority (KRA) Commissioner-General Humphrey Wattanga was Thursday afternoon thrown out of a meeting with Members of Parliament (MPs) for failing to produce documents on time in the investigations into the alleged loss of Sh62 billion in a tax evasion scandal involving two companies.

Mr Wattanga had appeared before the National Assembly’s Finance and National Planning Committee to explain whether Louis Dreyfus Company (LDC) Asia PTA limited and Louis Dreyfus Company Kenya (LDC) limited evaded paying taxes by misdeclaring palm oil cargoes shipped into the country.

The committee, chaired by Molo MP Kimani Kuria, was taken aback after the Commissioner-General failed to send advance copies of the required documents and instead bombarded MPs with voluminous documents on the morning he appeared before the committee.

“You cannot expect us to go through these voluminous documents in this session and have a meaningful engagement with you. It is not possible. We need more time,” Mr Kuria said.

Mr Kuria was speaking as committee members questioned whether the KRA management was trying to buy more time “on a serious allegation of tax evasion at a time when the country is struggling to raise revenue to meet its obligations”.

“The tradition in this house is that companies appearing before committees must submit their documents at least 24 hours before the start of a committee meeting,” said Eldas MP Adan Keynan.

In a letter to the Commissioner General dated August 29, 2024, the documents were to be submitted to Parliament by September 6, 2024.

“It is in your interest that the information reaches us on time. As a parliamentary committee, we have a right to receive information in good time. This issue of creating a time crisis has been resolved by the current constitution,” said the Eldas MP.

Mr Wattanga was due to appear before the Committee on September 10, 2024, but requested more time and was granted September 24, 2024.

The Committee had requested KRA to provide details of the total cargo volume of palm oil imported by LDC Asia PTA through the Port of Mombasa from February 23, 2023 to June 26, 2024.

The Committee wanted the details to include the volumes of RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and crude palm fatty acid distillate.

The Committee also wanted Mr Wattanga to provide details of the total taxes and duties paid by LDC Asia PTA on the import of the palm oil cargo from February 23, 2023 to June 26, 2024.

Copies of all import declaration documents, including but not limited to port health reports, Kenya Bureau of Standards (Kebs) reports, bills of lading and cargo manifests for all 120 cargoes of palm oil imported by the company between February 23, 2023 and June 26, 2024 are also required.

The committee also wants a list of consignees for all palm oil cargoes imported by the company during the period.

The committee also sought details of the cargo volumes of RBD palm stearin, crude palm kernel oil, crude palm olein, crude palm oil and crude palm fatty acid distillate imported by LDC-Kenya Limited, Acee Limited, Mazeras Oil Limited and Vipingo Industries Limited through the port of Mombasa.

Mr Wattanga was also required to provide details of the taxes and fees paid by LDC- Kenya limited, Acee limited, Mazeras Oil limited and Vipingo Industries limited on the importation of the palm oil products.

Copies of all import declaration documents for palm oil cargoes by LDC-Kenya limited, Acee limited, Mazeras Oil limited and Vipingo Industries limited through the port of Mombasa were also requested.

The copies, the committee said, should not be limited to port health reports, Kebs, SGS reports, bills of lading and cargo manifests.

Documents before the committee show that the product imported by LDC companies for use in Kenya and the other East African countries using the port of Mombasa for imports is misdeclared in two ways.

Firstly, the product arrives as a blend of 60 per cent crude palm oil and 40 per cent refined palm oil, which is then declared as crude palm oil.

Alternatively, the product is imported largely in refined form but declared as crude palm oil at the port of Mombasa to avoid the 35 per cent import duty or $500 per tonne.

The product also attracts an Import Declaration Fee (IDF) of 2.5 per cent, a Railway Development Levy of 1.5 per cent and Value Added Tax (VAT) of 16 per cent.

Kenya imposes a 35 per cent duty on imported refined palm oil and a 10 per cent duty on semi-refined palm oil.

Palm oil imported from Malaysia and Indonesia, the world’s two leading exporters of palm oil products, accounting for 85 per cent of production, comes 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 and is used in the manufacture of soaps and edible fats. RBD palm olein is refined palm oil, while crude palm kernel oil is a by-product used in the manufacture of soap.

Crude palm olein is palm oil that has been semi-processed, i.e. it has only been fractionated to separate the liquid portion from the solid portion of the oil, and is subject to an import duty of 10 per cent.

Crude palm oil is unprocessed oil that 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 if the product were imported in its crude form, the country would benefit as the by-products of the refined oil would help in the production of soap, among other things.

Documents tabled in Parliament show that the government lost Sh16.5 billion in revenue in 2022 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 that were misdeclared.

In 2024, the government has already lost Sh13.83 billion in revenue from the 163,567 tonnes imported so far.

LDC-Kenya limited, based in Mombasa, is one of the country’s leading vegetable oil traders with a growing presence across East Africa.

It’s a major importer of palm oil products for millers and refiners in East Africa and operates one of the largest oilseed storage facilities in the region.