Parliamentary investigations into the possible loss of Sh64 billion through misdeclared imports of edible palm oil has stalled after the National Assembly Committee on Finance and National Planning failed to get testimonies from key officials and entities.

Key challenges include the failed testimony of former Kenya Revenue Authority (KRA) boss Humphrey Wattanga, alleged inaction by Treasury Cabinet Secretary (CS) John Mbadi and the committee's inactivity in finalising the report.

The committee launched the investigations two years ago on its own motion after intelligence that the government was losing revenue through the malpractice.

The documents reveal that misdeclaration of the palm oil is done in two ways to evade paying the required import duty at the Port of Mombasa.

This includes blending 60 percent crude palm oil with 40 percent refined palm olein and declaring the entire shipment as crude palm oil “allowing them to avoid paying import duties altogether.”

The committee, chaired by Molo MP Kuria Kimani, summoned Mr Wattanga during its meeting held on September 24, 2024.

Mr Wattanga was, however, thrown out by the committee over the manner in which the documents were presented.

The committee chairperson failed to respond to the Business Daily inquiries on the fate of the investigations.

Ever since, requests for his appearance, before exiting KRA, the investigations had been frustrated by either his refusal to honour committee invitations or requests for more time that seemingly never came to pass.

Earlier, the committee chairperson reckoned that Mr Mbadi had derailed the investigations after failing to honour committee invitations to present the required information.

CS Mbadi also did not respond to our inquiries sent to his known phone number regarding the accusations levelled against him.

“We are disappointed with the National Treasury because it is making the committee unable to discharge its mandate. We have so many matters pending before the committee, yet we cannot move,” said Mr Kimani as his committee members also weighed in.

“This committee has lost meaning,” said Mr John Ariko, the Turkana South MP, as his Kitui Rural colleague David Mwalika noted, “It is disheartening to start an investigation on a matter, then it disappears because some people cannot honour the committee’s summons.”

The Parliamentary Budget Office (PBO) documents presented to the House Committee show that in 2022, the government lost Sh16.5 billion in revenue from the misdeclared 233,000 metric tons and Sh32.54 billion in 2023 from 387,868 metric tons.

In 2024, the government lost Sh13.83 billion from the 163,567 metric tons imported.

Other than KRA, the Finance Committee had listed State agencies- Kenya Bureau of Standards (Kebs), Government Chemist, AFFA, and Kenya Ports Authority (KPA) and Intertek, a private laboratory, for questioning that has never been.

Also lined up for interrogation were consignees- Vipingo, Mazeras, ACEE, Mvita Oils, LDC Kenya, LDC and PTA Asia.

“It has been observed that a large-scale tax evasion scheme is taking place at the Mombasa port involving misdeclaration of refined edible palm oil as crude palm oil,” the PBO document said, adding: “LDC Kenya has been implicated in misdeclaring palm oil shipments for their clients intended for Kenya, Uganda, Tanzania and Rwanda.”

Under Kenyan law, imported refined edible palm oil is subject to a 35 percent import duty, while semi-refined palm oil attracts 10 percent duty.

All imports are liable for a 2.5 percent Import Declaration Fee (IDF), 1.5 percent Railway Development Levy (RDL) and 16 percent Value Added Tax (VAT).

“These taxes are meant to protect local industries by encouraging the import of crude palm oil, which requires further processing domestically, thereby adding value and generating employment,” the PBO document said.

By misdeclaring refined palm oil as crude palm oil in Kenya, importers not only save on the export tax but also evade the 35 percent import duty.

Blending refined and crude palm oil reduces local processing costs, further benefiting the importers.

Because the product requires less processing at the destination, its customers benefit from lower processing costs, creating an unfair advantage over competitors.

Further blending 40 percent refined palm oil with 60 percent crude palm oil in the same ship tanks violates the World Customs Organization guidelines, which provide that any adulterated cargo cannot be classified as crude palm oil, meaning that duties should apply to the entire shipment.

The illegal blending benefits the exporters who save $28 per tonne when shipping the cargo from Indonesia and Malaysia which account for 85 percent of the global palm oil production.

To promote local value addition, Indonesia and Malaysia have imposed a $70 per tonne export tax on crude palm oil while refined oil is exempt from export duties.

“This allows importers to save $70 per tonne when exporting refined palm oil from these countries,” the PBO document pointed out.

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