The Kenyan government has launched a probe into Huawei Technologies (Kenya) Ltd. concerning a significant tax waiver amounting to Ksh1.92 billion ($12.57 million). The investigation, initiated by parliamentary members, aims to scrutinize the circumstances under which the Chinese corporation obtained this substantial tax relief from the National Treasury.
The inquiry has sparked tensions between Kenyan MPs and Huawei, with the Finance Committee engaging in rigorous questioning of the company’s executives. As reported by The East African, senior Huawei executives faced tough inquiries from the Finance Committee but were later sent away for their inability to provide a satisfactory explanation regarding the tax waiver issued by the Kenyan Revenue Authority (KRA).
Molo MP Kuria Kimani, the chairman of the inquiry committee, declined to meet with Huawei’s director, Kevin Wen, as the company failed to furnish a written response to the committee’s inquiries beforehand.
In response, Kevin Wen emphasised a distinction between Huawei Technologies (Kenya) Ltd. and the company involved in the contractual agreements. He asserted that the contract under scrutiny was with Huawei Technologies (China) Co. Ltd. and not the Kenya-based entity, emphasising that they are separate entities and not subsidiaries.
“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.”
He says
Read also: LemFi suspends remittance services in Ghana amid central bank clampdown
Kenya’s Huawei Probe: What you should know
The probe revolves around a demand notice issued by the KRA in March 2023, seeking to withhold tax arrears amounting to Ksh1.953 billion ($12.8 million) from the Ministry of Information, Communications, and Technology (ICT). The KRA’s demand included principal tax, penalties, and interest, totalling Ksh1.953 billion.
This demand stemmed from obligations under the Income Tax Act, requiring the ministry to withhold tax from payments made to Huawei Technologies (Kenya) Ltd. during the period from 2016 to 2019.
The company secured a Ksh17 billion ($111.3 million) contract between 2016 and 2019 to execute the National Fibre Optic Backbone Infrastructure II (Nofbi II) and Nofbi II Expansion (Nofbi IIE) projects. Hence, the Treasury granted the ICT ministry a Ksh1.9 billion ($12.5 million) tax waiver owed to it by Huawei for laying fibre optic cables.
But during a session, allegations surfaced that the tech company sought a tax waiver from former ICT Cabinet Secretary Joe Mucheru following the KRA’s tax demand of Ksh1.42 billion. The former ICT CS then petitioned the former Treasury CS, Ukur Yatani, who granted the tax waiver in July 2022.
Kimani highlighted the ministry’s failure to deduct WHT from payments made to Huawei Technologies (Kenya) Ltd, posing inquiries about its efforts to settle the tax liabilities.
“You were under obligation to pay the WHT, but the ministry was not subjecting the payments made to Huawei Technologies (Kenya) Co., Ltd. to the WHT,” Mr Kimani said to Wen. “Now that the ICT Ministry has paid you all the money without deducting WHT, what have you done to repay the tax to KRA?”
Consequently, due to the company’s inability to furnish written responses and adequately address the committee’s inquiries, MP Kuria Kimani directed the Huawei Technologies management to reappear before the committee on November 22, 2023, with a comprehensive written explanation.
The tax waivers granted by the Treasury have benefited several companies, including De La Rue, Kenya Breweries Ltd., Moja Expressway, and the National Commercial Bank of Africa, among others. The waivers were later cancelled by the taxman for entities that had benefited. Additionally, the ICT ministry received a waiver of Ksh1.9 billion ($12.5 million) owed by Huawei for laying fibre optic cables.
The Finance Committee’s investigation into these tax waivers, part of a broader inquiry into tax relief granted during former President Uhuru Kenyatta’s tenure, has raised significant concerns regarding tax compliance and the dispensation of tax breaks to both local and multinational corporations in Kenya.
Read also: Kenyan court clears Flutterwave of money laundering charges as ARA withdraws last lawsuit
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
