Huawei Faces Possible Sanctions in Kenyan Tax Waiver Inquiry

In a recent parliamentary session, Huawei Technologies, the Chinese multinational company, faced intensified scrutiny, marking its third failure to provide essential documents elucidating a significant tax waiver received in Kenya, amounting to Sh1.92 billion. The Finance and National Planning Committee, responsible for this inquiry, invoked constitutional powers, directing Huawei Kenya CEO Gao Fei to produce requisite paperwork within seven days.

Committee Chair Kuria Kimani issued a warning: Failure to comply might trigger an ominous declaration, labeling Huawei as a hostile witness. This strategic move could potentially deliver severe consequences for the technological giant, as Parliament wields such power under Article 125 of the Constitution. This article authorizes Parliament not only to summon individuals but also to demand evidence and compel document production—a potent tool in ensuring transparency and accountability in national affairs.

Previously, the committee directed Huawei to furnish contracts related to its transactions with the Ministry of Information, Communication, and Technology. However, when CEO Gao Fei and other Huawei representatives appeared before the committee, they did so without providing the requested documents, inciting frustration among committee members.

This marks the third occasion where the committee has rebuffed a Chinese firm’s management, failing to provide clear justification for the Kenyan government’s substantial waivers through the Kenya Revenue Authority (KRA).

Huawei CEO Gao Fei characterized the contract, executed in two phases during 2010 and 2014, as a historic project. He confirmed that they are currently engaged in tracing back to locate essential documents. Despite their assertion of presenting an initial one-page response to the committee’s interrogations, Huawei ultimately failed to furnish all comprehensive documentation requested.

Committee Chair Kuria Kimani voiced his disbelief in Huawei’s claim of not possessing essential documents, emphasizing that globally, Huawei enjoys recognition as one of the top technology companies. Thus, he appealed to Article 125, a legal instrument he employed compelling them to produce required documentation within seven days.

The Finance and National Planning Committee’s inquiry aims to uncover the circumstances surrounding a total of Sh620 billion in tax waivers granted to multiple companies during the last five years of former President Uhuru Kenyatta’s administration. Notable beneficiaries include De La Rue, Kenya Breweries Limited, and Moja Expressway.

The Ministry of Information and Communication Technology (ICT) neglected to retain and pay tax concerning Huawei’s construction of the Konza technopolis. Consequently, The Treasury awarded a Sh1.9 billion tax waiver—an amount owed by Huawei for laying fiber optic cables—to the ICT Ministry.

As part of an expansive investigation into the taxation practices of diverse companies under the preceding administration, this inquiry concerning a tax waiver takes precedence. The Kenya Revenue Authority originally issued a demand notice for withholding tax income arrears, subsequently engendering significant amounts and legal intricacies, presenting us with this complex situation.

The looming deadline for Huawei to produce the requested documents could significantly impact this inquiry’s outcome and influence a broader discussion on tax compliance and waivers in Kenya. The committee demonstrates its commitment to financial transparency and accountability when dealing with multinational corporations operating within the country through their actions.

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