The Kenya Revenue Authority (KRA) has demanded $79 million (Sh10.3 billion) in tax claims from US geothermal power company, Ormat Technologies for the five years between 2017 and 2022.
The company has disclosed that its subsidiary in Kenya, OrPower 4, received the tax claim in April and excludes any potential interest and penalties, exposing it to a huge tax liability if proven.
“On April 23, 2024, the company's branch in Kenya received a Letter of Preliminary Investigation Findings from the Kenya Revenue Authority (KRA) relating to tax years 2017-2022,” said the firm in its latest regulatory filings.
The company, however, states that the tax demand has no merit.
“Based on a preliminary review of the letter, the company and its advisors believe that these preliminary findings have no merit and that the company has strong arguments against these preliminary findings raised in the KRA letter,” it said.
OrPower 4 is the third-largest power producer in Kenya only behind State-owned KenGen and Lake Turkana Wind Power (LTWP) and generates geothermal electricity.
OrPower 4 owns four geothermal power plants at Olkaria in Naivasha with a total capacity of 150 megawatts (MW), making it the country’s second-largest geothermal power producer.
This comes at a time when KRA has accelerated its tax demands on both local and foreign businesses as part of fresh tax revenue mobilisation measures.
This comes at a time when the President William Ruto's administration is seeking to raise the share of revenue to the Gross Domestic Product (GDP) to 20 percent in the medium term.
Kenya’s revenue as a percentage of GDP has been declining over the years from 18.1 percent in the fiscal year 2013/14 to 14.3 percent in 2022/23 despite rising expenditure pressure, resulting in increased borrowing to bridge the revenue gap.
President Ruto has put pressure on KRA to raise Sh2.495 trillion in tax revenue in the current financial year that ends on June 30. By April 30, just two months to the close of the fiscal year, the taxman had raised Sh1.745 trillion, according to figures released by the National Treasury.
This means that the taxman faces a herculean tax of raising Sh750 billion in May and June to meet the year’s tax revenue targets.
The tax agency last year deployed 1,400 tax revenue assistants across the country to help raise additional taxes from business premises.
