By The Weekly Vision Reporter
The National Treasury has defended its decision to grant a tax exemption on a consignment of imported raw sugar, resulting in an estimated KSh104 million in foregone revenue. It argues that the waiver is intended to stimulate domestic manufacturing, create jobs and strengthen Kenya’s industrial sugar sector, rather than maximise short-term tax collections.
In a submission to the National Assembly’s Departmental Committee on Trade, Industry and Co-operatives, the Treasury explained the basis for the exemption in response to concerns raised by Members of Parliament over the importation of raw sugar and the resulting loss of government revenue. The matter comes amid wider parliamentary scrutiny of sugar sector policies, including higher excise duties on imported sugar introduced under the Finance Act 2026.
According to the Kenya Revenue Authority (KRA), the government waived taxes amounting to KSh104,090,404, comprising:
⦁ KSh57,828,002 in Import Declaration Fee (IDF).
⦁ KSh46,262,402 in Railway Development Levy (RDL)
The Treasury emphasised that the exemption applied solely to the Import Declaration Fee and Railway Development Levy on the imported raw sugar. It was neither a blanket tax exemption nor a remission of duties on refined sugar intended for direct consumer sale. The Treasury acknowledged that it did not undertake a formal quantitative cost-benefit analysis before approving the waiver. Instead, officials relied on a qualitative assessment, concluding that the long-term economic and industrial benefits outweighed the immediate loss of tax revenue.
According to the submission, the exemption is expected to:
⦁ Create both direct and indirect employment opportunities.
⦁ Facilitate the transfer of technical expertise and industrial skills to Kenyan workers.
⦁ Maximise utilisation of the country’s installed sugar refining capacity.
⦁ Promote local value addition by converting imported raw sugar into industrial-grade refined sugar.
⦁ Ensure a stable supply of industrial sugar for manufacturers in the pharmaceutical, confectionery, beverage and food-processing sectors.
⦁ Reduce Kenya’s dependence on imported finished industrial sugar.
⦁ Position Kenya as a regional exporter of food-grade and pharmaceutical-grade industrial sugar.
⦁ Support the Government’s broader agenda of industrialisation, manufacturing and value addition.
The Treasury argued that these benefits would increase progressively as the beneficiary refinery expanded its operations, making the limited and conditional tax exemption justifiable in the public interest. Kenya continues to face a structural sugar deficit. Annual domestic production is estimated at between 650,000 and 850,000 metric tonnes, while national consumption exceeds 1.1 million metric tonnes, making imports necessary to bridge the gap. At the same time, the Government has introduced several measures aimed at protecting local producers while supporting industrial users of sugar.
These include:
⦁ The Finance Act 2026, which raised excise duty on imported sugar from approximately KSh7.50 per kilogramme to KSh40 per kilogramme to shield local producers from cheaper imports.
⦁ East African Community (EAC) duty remission schemes allowing approved manufacturers to import industrial sugar at reduced duty rates for use in products such as beverages and confectionery.
⦁ Ongoing reforms under the Sugar Act, including the leasing of state-owned sugar mills and initiatives to improve domestic refining capacity.
The Treasury stressed that imported raw sugar differs significantly from refined white sugar sold directly to consumers. Raw sugar requires further processing before it can be used by manufacturers and is intended to support industries that cannot source adequate quantities of industrial-grade sugar locally.
Nevertheless, tax waivers on sugar imports have consistently attracted criticism over possible revenue leakage, diversion of duty-free imports into the retail market and their potential impact on domestic millers. Parliamentary committees have intensified scrutiny of sugar import permits issued by the Kenya Sugar Board, questioned the legal basis for some approvals and called for greater transparency in the administration of tax exemptions.
The debate mirrors previous controversies surrounding duty-free import windows for maize, rice and sugar introduced to cushion consumers against the rising cost of living, with legislators repeatedly demanding independent audits to determine whether the tax incentives ultimately benefited consumers. The Treasury’s submission does not identify the company that benefited from the exemption. However, separate reports have linked similar raw sugar import arrangements to firms such as Mombasa Sugar Limited, which has previously imported substantial consignments of raw sugar for local refining under multi-agency supervision designed to prevent diversion into the domestic retail market.
As Parliament continues its examination of the waiver, lawmakers are expected to seek greater accountability over the granting of tax exemptions, balancing the need to support industrial growth against the imperative of safeguarding public revenue.
