Investors will continue paying the punitive fees for environment audits and levies to the construction regulator for their projects despite the Treasury abolishing the charges in June.
While the bulk of the tax measures took effect after the announcement of the Budget Statement on June 8, the project fees have remained unchanged—making it costly to build homes, power plants and office towers.
The National Environment Management Authority (Nema) and the National Construction Authority reckon that there is no legal backing for the removal of the levies and their budgets are hinged on the levies and fees.
Nema had in September 2013 removed a flat rate charge and introduced a minimum assessment fee of Sh10, 000 or 0.1 per cent of project cost, without an upper limit.
The regulation removed the maximum limit of Sh1 million that existed previously, making it punitive for large- scale real estate developers.
Developers whose projects exceed Sh5 million also pay a levy of 0.5 per cent of the value of the contract before they can start work to the National Construction Authority.
Treasury secretary Henry Rotich reckons the Environment and the Land ministries need to change the current laws to scrap the environment audits fees and construction levy that has hit developers of mega-projects hard.
“It is up to the relevant ministry to discuss with Nema and then come up with a Bill. Once this is done, I expect it to be included in a Miscellaneous Bill,” Mr Rotich said when reached for comment. “It is a sector Bill and so I couldn’t include it in Finance Bill.”
The Finance Bill contains tax proposals highlighted in Mr Rotich’s Budget Statement.
Developers had welcomed the removal of the fees last month and will now be forced to shoulder the burden for new projects.
For instance, the developers of Kenya’s first coal-powered plant in Lamu had to part with Sh200 million as EIA fees based on the project value of Sh200 billion.
“Treasury approved our 2016/17 budget to be funded to the tune of Sh800 million from the licence fees,” Nema director-general Geoffrey Wahungu said, defending the fee collection.
This means the State-backed agency would suffer cash shortfalls should it stop collecting the fees, affecting its operations to ensure environmental safety.
Nema requires projects such as mineral processing, oil drilling, infrastructure development, real estate and waste disposal to be licensed before their implementation.