Companies call for quick removal of project levies

The private sector has asked the government to move with speed and scrap environment audit fees and regulatory levies on new projects.

The charges were removed in this financial year’s budget but failure by the Environment and Land ministries to degazette them means they remain in force.

Businesses have been compelled to carry an extra burden as the bulk of new tax measures proposed by Treasury secretary Henry Rotich have taken effect after the Budget statement was read on June 8.

The new charges include increase in the road maintenance levy from Sh12 to Sh18 per litre of diesel and petrol.

Investors, through the Kenya Private sector Alliance (Kepsa), faulted the government for leaving the two levies intact, making it costly to build homes, office blocks, shopping malls and power plants.

Kepsa chief executive Carole Kariuki said the levies have only served to increase the cost of doing business and added to the heavy tax burden that businesses are forced to shoulder.

“The two ministries need to degazette the levies. We will be following up with them to fast-track this,” said Ms Kariuki in an interview with Smart Company.

“The private sector is already paying taxes that should cover these regulators to enforce the law,” she added.

The levies are administered by the National Environment Management Authority (Nema) and the National Construction Authority who said their budgets are hinged on the fees.

Nema charges 0.1 per cent of the project cost as environmental impact assessment (EIA) fee, which is applicable to projects valued at over Sh10 million. This puts the minimum charge at Sh10,000, without an upper limit.

The current charges took effect in September 2013 after Nema phased out its previous flat rate levy and removed the maximum limit of Sh1 million.

Removal of the cap has been punitive to businesses undertaking large scale projects such as those in the energy sector and others which break ground to set up new investments critical for creation of jobs.

Mr Rotich in June abolished the fees to make the country competitive as an investment destination. He also announced the removal of construction levy that developers are forced to pay.

Developers whose projects exceed Sh5 million pay a levy of 0.5 per cent of the value of the contract to the National Construction Authority before they can start work.

Investors had welcomed the removal of the fees last month but will now be forced to shoulder the burden for new projects should the current situation continue.

For instance, developers of Kenya’s first coal-powered plant in Lamu had to part with Sh200 million as environment audit 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.

This means the State-backed agency would suffer cash shortfalls should it stop collecting the fees, affecting its operations meant to safeguard the environment. EIA is prepared by investors and submitted to Nema for approval and details project’s site location, its likely impacts on surrounding areas and remedial measures.

The authority requires projects such as mega housing initiatives, office complexes, shopping malls, mineral and oil drilling to prepare and submit the report before construction begins.

President Uhuru Kenyatta in October 2014 directed Nema to reintroduce the Sh1 million cap saying that payment of the fees by property developers as a percentage of the value of projects is punitive and risks scaring investors.