Rai Cement company failed to pay Sh3.9 million levy fees in the financial year ended June 2023, an audit has revealed, pushing its total unremitted dues over the years to Sh10.7 million.
Records showed that cement levy payments by the company have for close to four years been below expectation relative to the volume of the commodity produced, leading to revenue losses for the government.
“Analysis of production and sales reports from Rai Cement Company revealed a variance of Sh3,997,920 (2022: Sh6,698,400) between cement levy remitted to the Ministry of Sh9,994,800 and the levy due on sales of Sh13,992,720. Further, analysis of production and sales reports from the Company for prior years revealed a cumulative loss of revenue of Sh10,696,320 due to irregular reduction of cement levy payable,” Auditor-General Nancy Gathugu said.
The audit noted that in the 2022/23 financial year, cement levy accounted for Sh1.04 billion of the Sh3.7 billion not tax receipts for government but observed that the cement levy revenues could have been more.
Ms Gathungu said the company continues to pay cement levy at the rate of Sh100 per tonne as opposed to Sh140 based on a letter it got from then Mining Cabinet Secretary John Munyes in June 2021.
The then Cabinet Secretary granted consent to the company for a reduced cement levy at a rate of Sh100 per tonne instead of Sh140 per tonne.
The Auditor-General however points out that Section 188 (2) of the Mining Act,2016 requires the Cabinet Secretary to make regulations to provide for conditions and criteria for determining an application for reduction or suspension of payment of royalties which had not been done at the time of granting the reduction.
In addition, there was no evidence of gazettement of the revised cement levy rate as provided for in Section 183 (20 of the Mining Act 2016). In addition, it was not clear why the levy rate of Sh100 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 provided for audit 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. In the circumstances, due to the variations, the Government cumulatively lost revenue amounting to Sh10,696,320,” the Auditor-General said.
The revelation by Auditor-General Nancy Gathungu comes a year after her office revealed that cement firms had failed to remit more than Sh2 billion in levies by June 2021, with among firms cited for failure to remit at the time being the East African Portland Cement, Savannah Cement and National Cement.
