In a significant legal development, High Court Judge Bahati Mwamuye has set October 9, 2024, as the date for hearing a high-profile case challenging the legality of a tax relief law that has reportedly granted Sh188 billion in exemptions to a steel manufacturer.
Lawyer Apollo Mboya has initiated this case against the Kenyan government, questioning the legitimacy of the Special Operating Framework Arrangements (SOFA) which have allegedly benefited Blue Nile Rolling Mills Limited.
Mboya’s petition, submitted to the Milimani High Court, challenges the SOFA framework’s application, which has been in place since 2020. The framework was designed to provide tax relief to encourage industrial development.
However, Mboya argues that the implementation of this framework has been arbitrary and unjustified, particularly in its application to Blue Nile Rolling Mills Limited.
The tax exemptions granted to Blue Nile include relief from Added Taxes, Customs Duty, Import Development Fund (IDF), Railway Development Levy (RDL), Export Investment and Promotion Levy (EIPL), and a reduced corporate tax rate of 10% for raw materials used in steel manufacturing. Mboya contends that these exemptions were awarded without proper legal authority or adequate oversight from the relevant Cabinet Secretaries for Treasury and Trade.
According to Mboya, the significant tax relief has allowed Blue Nile Rolling Mills Limited to lower its production costs by 47.5% for billets and 62.5% for wire rods.
This has given the company a considerable competitive advantage, enabling it to sell products at much lower prices than its competitors.
Mboya argues that this has led to an unfair market environment, threatening the survival of over 99 other steel manufacturers and potentially resulting in the loss of more than 20,000 jobs.
Additionally, he estimates that the closure of these companies could result in a Ksh33.5 billion revenue shortfall for the government.
Mboya’s petition seeks orders to stop the SOFA framework’s application and to invalidate the tax exemptions granted to Blue Nile Rolling Mills Limited.
He also raises concerns about potential misuse of such frameworks, which might encourage other entities to restructure their businesses to benefit from similar exemptions, further undermining fairness and transparency.
