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"content": "companies, consultants and employees involved in projects under the financing agreements signed between the Government of Kenya and the Government of Japan. The policy and requirement of the Government of Japan is to have Japanese companies, consultants and employees involved in the implementation of any project financed by the Government of Japan exempted from tax. This is not limited to Kenya only, but it is a requirement of the Government of Japan for all financing agreements between the Government of Japan and any other Government. All agreements signed between the Japanese Government contain this exemption. Specific agreements are contained in the Schedule which is contained in the Report. I will just give a few examples, namely, the project for the improvement of the power distribution system in and around Nakuru County and Mombasa City County, the project for infrastructure development in Mombasa Special Economic Zone near Dongo Kundu Area, the project for enhancing trade facilitation and border control capacity in East Africa, the project for human resource development scholarship, Health Sector Policy Loan for attainment of universal health coverage, Olkaria 1 Unit for geothermal power project and the Mwea Irrigation Development Project among others. They are all contained in the Schedule. On scrutiny of these instruments, the Committee examined exemption from Income Tax for the Japanese companies, consultants and employees in accordance with the Constitution of Kenya, the Interpretation and General Provisions Act, the Income Tax Act, and the Statutory Instruments Act. Pursuant to Section 16 of the Statutory Instruments Act, which requires the Committee, where it is practically possible, to confer with the regulation-making authority, the Committee held a virtual meeting with the regulation-making authority, namely, the Cabinet Secretary for the National Treasury and Planning on 15th February 2021 where he responded to the Committee's concerns. The Cabinet Secretary assured the Committee that the overall benefits to be derived from effective and efficient implementation of these projects outweigh the taxes foregone. In addition, the income from the jobs created from the projects or the income derived from the expenditure on the said projects generates revenue that is far much above the tax foregone as a result of the exemption. Hon. Deputy Speaker, the Members raised some concerns that the exemption seems discriminatory and stands to benefit Japanese nationals more than the Kenyan citizens considering that local companies are not exempted from tax, yet Japanese enjoy expatriate benefits. In addition, some Kenyan companies doing business in Japan do not enjoy similar exemptions. Members also sought to know the status of each of the agreements earmarked for exemption. Documents were submitted indicating that four of the 16 projects are grants, while the rest are loan agreements. The Committee observed as follows, having examined Legal Notice No. 15 of 2021 in accordance with the Constitution of Kenya, the Interpretation and General Provisions Act, and the Statutory Instruments Act: (i) The Legal Notice was submitted within the statutory timelines contemplated under Section 11 of the Statutory Instruments Act; (ii) The Legal Notice was published on 26th February 2021, submitted to the Clerk on 9th March 2021 and laid before the House on 23rd March 2021, which is all in accordance to Section 11 of the Statutory Instruments Act; and, The electronic version of the Official Hansard Report is for information purposesonly. A certified version of this Report can be obtained from the Hansard Editor."
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