Kenya’s parliament has set a two-week deadline for the management of Chinese firm Huawei Technologies (Kenya) Ltd to explain the circumstances in which they were granted a Ksh1.92 billion ($12.57 million) tax waiver by the National Treasury.
The Finance Committee turned away top Huawei managers after they failed to explain why the state waived millions of dollars due to the Kenya Revenue Authority (KRA). Huawei Technologies (Kenya) director for enterprise Kevin Wen, appeared before the committee that is inquiring into the circumstances in which former President Uhuru Kenyatta’s regime granted Ksh620 billion ($4 billion) tax waivers to local and multinational companies during his last term in office.
The companies that benefited from the waivers included British multinational currency printer De La Rue, alcoholic drinks manufacturer Kenya Breweries Ltd (KBL), and Moja Expressway, which runs the Nairobi Expressway toll road.
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The taxman has since cancelled the waivers granted to De La Rue, KBL, National Commercial Bank of Africa, LDK, ‘Maendeleo ya Wanawake’ Organisation, the Red Court Hotel, which operates under Boma Hotels, and the Ministry of Information and Communication Technology. The ministry failed to withhold and remit tax from Huawei Technologies Ltd, related to the construction of the Konza technopolis.
The Treasury also granted the ICT ministry a Ksh1.9 billion ($12.5 million) tax waiver owed to it by Huawei for laying fibre optic cables.
The ministry received the tax breaks after the taxman dropped a demand notice for pay-as-you-earn.
The committee chaired by Molo MP Kuria Kimani turned away the Huawei manager after he failed to provide a written response to the queries raised.
Huawei Technologies entered into a Ksh17 billion ($111.3 million) contract between 2016 and 2019 to lay the National Fibre Optic Backbone Infrastructure II (Nofbi II) and Nofbi II Expansion (Nofbi IIE) projects with the ICT ministry.
“The contract was between the ICT ministry and Huawei Technologies (China) Co Ltd and not Huawei Technologies (Kenya) Ltd. These are separate companies, and we are not a subsidiary,” said Mr Wen.
But Mr Kimani challenged this, saying that KRA had, on March 9, 2023, issued a demand notice for withholding tax income arrears for the period 2016 to 2019. He said the terms of the contract required the ministry to withhold tax from payments made to Huawei Technologies (Kenya) Ltd) as per the Income Tax Act.
The KRA assessed and demanded WHT from the ICT Ministry amounting to Ksh1.953 billion which comprises principal tax of Ksh1.43 billion, penalties (Ksh71.3 million), and interest (Ksh456.7 million).
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“You were under obligation to pay the WHT but the ministry was not subjecting the payments made to Huawei Technologies (Kenya) Co ltd to WHT,” Mr Kimani said.
“Now that the ICT Ministry paid you all the money without deducting WHT, what have you done to repay the tax to KRA?”
Mr Kimani said it was after Huawei received the KRA tax demand of Ks1.42 billion that the firm proposed a tax waiver by former ICT cabinet secretary Joe Mucheru.
“You went to former ICT CS for the tax waiver. The former ICT CS then wrote to the former Treasury CS Ukur Yatani who granted you the waiver in July 2022,” Mr Kimani said.
“Because you have no written response and your ability to respond to all questions asked, we are giving you two weeks to prepare and submit a written response.”
Mr Kimani directed the Huawei technologies management to appear before it on November 22, 2023.
Source: The East African