The Lower Eastern Times Opening The Third Eye
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An audit has uncovered that Rai Cement company neglected to settle levy fees amounting to Sh3.9 million in the fiscal year concluded in June 2023, contributing to its total outstanding dues over the years reaching Sh10.7 million.
Examination of records revealed that the cement levy payments made by the company have consistently fallen short of expectations over nearly four years relative to the volume of cement produced, resulting in revenue losses for the government.
“A review of production and sales reports from Rai Cement Company identified a discrepancy of Sh3,997,920 (2022: Sh6,698,400) between the cement levy remitted to the Ministry totaling Sh9,994,800 and the levy due on sales amounting to Sh13,992,720. Furthermore, an analysis of production and sales reports from previous years disclosed an accumulated revenue loss of Sh10,696,320 due to irregular reduction of the cement levy payable,” stated Auditor-General Nancy Gathugu.
The audit noted that in the 2022/23 fiscal year, cement levy contributed Sh1.04 billion to the government’s non-tax revenue of Sh3.7 billion. However, it observed that the cement levy revenues could have been higher.
Gathugu mentioned that the company has continued to pay the cement levy at a rate of Sh100 per tonne instead of Sh140, as per a letter received from the then Mining Cabinet Secretary John Munyes in June 2021.
However, the Auditor-General highlighted that Section 188 (2) of the Mining Act, 2016 necessitates the Cabinet Secretary to establish regulations outlining conditions and criteria for determining applications for the reduction or suspension of royalties, which had not been enacted at the time of granting the reduction.
Moreover, there was no evidence of the gazettement of the revised cement levy rate as stipulated in Section 183 (20) of the Mining Act 2016. It was also unclear why the levy rate of Sh100 was applied to one company while the sector had several players manufacturing the same product.
“Although a letter from the Cabinet Secretary dated June 15, 2021, authorized the Company to pay a reduced cement levy rate of Sh100 per tonne instead of the gazetted rate of Sh140 per tonne, the letter was not based on any existing regulations as required. Consequently, due to these discrepancies, the Government incurred a cumulative revenue loss amounting to Sh10,696,320,” stated the Auditor-General.
This disclosure by Auditor-General Nancy Gathugu comes after her office previously revealed that cement firms had defaulted on remitting over Sh2 billion in levies by June 2021, with firms such as East African Portland Cement, Savannah Cement, and National Cement among those cited for non-remittance at that time.
