Lawmakers and GDC clash over Sh6 billion unpaid tax

Members of Parliament have put the Geothermal Development Company (GDC) to task over Sh6 billion unpaid tax from the 2014/15 financial year.

During a meeting with top managers of the corporation recently, the lawmakers noted a query by Auditor General Nancy Gathungu over failure to remit the money to the Kenya Revenue Authority (KRA) from income earned from sale of steam in the nine financial years.

The amount has compounded to Sh6 billion, with lawmakers demanding to be informed why GDC failed to remit the money like other state corporations.

In the audit report, Ms Gathungu says failure to remit the money to KRA has a huge impact on the outstanding corporation tax and other related penalties.

“The company is required to comply with laws and other related regulations, including remission of taxes to the KRA as per the prescribed rates and remittance,” the audit report says.

According to the Auditor-General’s report, which is being examined by the Pokot South MP David Pkosing-chaired panel, GDC owed KRA Sh4,042,976,000 as at the 2018/19 financial year.

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The money had been accrued from the 2014/15 to 2018/19 fiscal years, the audit says.

As at June 2019, the interest and penalties accrued for failure to remit taxes by the corporation stood at Sh1,440, 807,350.

According to Ms Gathungu, failure to pay the taxes could expose the parastatal to many court cases.

“In the event that this matter is not resolved with KRA, the company is at risk of litigation and other recovery measures regarding the outstanding taxes, interest and penalties,” reads the report by the Auditor-General.

In a meeting with GDC Managing Director Paul Ngugi and other officials on Thursday, lawmakers demanded answers on why the company has not been paying taxes.

The MPs added that they would consider summoning KRA and National Treasury Cabinet Secretary Njuguna Ndung’u over the matter.

Aldai MP Marianne Kitany said paying tax is an obligation and should never be an audit query.

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“The Sh6 billion is not pocket change. This is an amount that could have gone to my constituency bursary fund kitty to assist needy students,” Ms Kitany said.

Rangwe’s Lilian Gogo told the corporation to provide evidence from KRA of being exempted from taxes.

“Members of the committee need to be convinced of the exemption because even lawmakers pay taxes. You cannot tell us that you are not paying,” Dr Gogo said.

Laikipia East MP Mwangi Kiunjuri said the company failed to explain to the committee why it has not been remitting dues to the taxman.

“The question we need to get answers to is whether the GDC is supposed to be paying taxes. If not, then the committee needs to be told why,” Mr Kiunjuri said.

Kaloleni lawmaker Paul Katana said GDC failed to give a concrete explanation on why it is not paying taxes.

He added that the corporation has not given a clear roadmap on how it intends to clear the pending taxes with KRA.

Mr Ngugi told the MPs that the GDC is expected to pay taxes, just like other companies, but asked for more time to explain.

“If our answers are not convincing, we can reconvene and bring a more satisfactory explanation,” Mr Ngugi told the lawmakers.

He had earlier said that the corporation was exempted from paying tax on the revenue it generated by the National Treasury.

He said the money was to be used to build steam wells.

However, profit generated from the sale of steam was to be taxed, the company MD added.

GDC is mandated to develop steam fields and sell geothermal steam for electricity generation to the Kenya Electricity Company (KenGen) and private investors.

The parliamentary committee, however, said any decision on exemption of taxes must be by KRA.

The members insisted that GDC should provide evidence of exemption from the taxman.

The corporation was given a week to put its papers regarding the matter in order.