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Huawei fails to table papers in Sh1.9bn tax waiver inquiry

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Huawei Kenya CEO Gao Fei before the National Departmental Committee on Finance and National Planning at Parliament buildings Nairobi on November 28, 2023 regarding tax abandonment of Sh 1.42b in FY 2021/22 granted to Huawei Technologies Limited. PHOTO | DENNIS ONSONGO | NMG

Chinese firm Huawei Technologies is now facing sanctions, including being barred from doing business in Kenya after it failed for the third time to provide documents to Parliament explaining how it got a tax waiver that has since accumulated to Sh1.92 billion.

In an escalation of the inquiry, the Finance and National Planning Committee on Tuesday invoked Article 125 of the Constitution to compel Gao Fei, Huawei Technologies Kenya chief executive, to produce the documents within the next seven days.

“Failure to which we will be forced to declare you a hostile witness and proceed to file our report to the House,” Kuria Kimani ruled before adjourning the session on Tuesday evening.

“You know the consequences of being declared a hostile witness by a committee of Parliament.”

Article 125 of the Constitution gives Parliament and its committees powers to summon any person to appear before it to give evidence or provide information.

The said section stipulates that a House of Parliament and any of its committees has the same powers as the High Court—to enforce the attendance of witnesses and examine them on oath, affirmation or otherwise, to compel the production of documents and to issue a commission or request to examine witnesses abroad.

“We directed you two weeks ago to provide the contracts that were signed between Huawei Technologies Kenya and the Ministry of Information, Communication and Technology, which are the subject of the committee's inquiring into,” said Mr Kimani.

“You have appeared here as the CEO of Huawei without any document, let alone a response to our letter dated October 27, 2023. So, what are we to discuss in this meeting?”

Read: Huawei to train 1000 yearly on networking

This is the third time that the committee has turned away the management of a Chinese firm after failing to explain why the State waived the billions of shillings due to the Kenya Revenue Authority (KRA).

Two weeks ago, MPs refused to listen to Huawei Kenya director for enterprise Kevin Wen.

The committee subsequently turned away Huawei officials led by Susan Agwata, from the finance department who was accompanied by four legal counsel to represent Mr Fei before the committee.

On Tuesday, Mr Fei told the committee that he did not have documentation to provide since the contract was executed in two phases and way back in 2010 and 2014.

“We presented a one-page document in response to your questions. We have no other documents to provide,” said Mr Fei.

“This was a historic project and we are tracing back the documents. Allow us more time.”

Mr Kimani said Huawei is one of the best technology companies in the world and cannot claim not to have documents sought.

“Following your failure to provide the contracts, documents to show how you were contracted and payment vouchers and other related documentation, I invoke Article 125 of the Constitution to compel you to provide the necessary documents within seven days,” Mr Kimani ruled.

“It's your choice. If you provide them, then it's fine, if you don't, it is fine. We will proceed to write a report that will be tabled on the floor of the House.”

The committee is inquiring into the circumstances under which several companies were granted tax waivers worth Sh620 billion in the last five years of former President Uhuru Kenyatta's regime.

Other companies that benefited from the tax waivers include British multinational currency printer De La Rue, alcoholic drinks manufacturer Kenya Breweries Limited, and Moja Expressway, which runs the 27-kilometre Nairobi Expressway toll road.

The taxman has since cancelled the tax waivers granted to De La Rue, KBL, National Commercial Bank of Africa, LDK, Maendeleo ya Wanawake Organisation, the Red Court Hotel, which operates under Boma Hotels, and the Ministry of Information and Communication Technology (ICT).

The ICT ministry failed to withhold and remit tax from Huawei Technologies Limited, which related to the construction of the Konza technopolis.

The Treasury also granted the ICT ministry a Sh1.9 billion tax waiver that was owed to it by Chinese company Huawei for laying the fibre optic cables.

The ICT ministry received the tax breaks after the taxman dropped a demand notice for pay-as-you-earn.

The KRA assessed and demanded WHT from the ICT Ministry amounting to Sh1.953 billion which comprises principal tax of Sh1.43 billion, penalties (Sh71.3 million), and interest (Sh456.7 million).

The KRA had on March 9, 2023, issued a demand notice for withholding tax income (WHT) arrears for the period 2016 to 2019.

Read: KRA tax demands rise amid field visits by new enforcers

Huawei Technologies entered into a Sh17 billion contract between 2016 and 2019 to lay the National Fibre Optic Backbone Infrastructure II (Nofbi II) and Nofbi II Expansion (Nofbi IIE) projects with the ICT ministry.

The terms of the contract required the ICT Ministry to withhold tax from payments made to Huawei Technologies (Kenya) Ltd) during the period 2016-2019 as provided under Sections 2, 10, and 35 of the Income Tax Act Cap 470.

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