CONSTITUTIONAL PETITION FOR CHINESE FIRMS OPERATING IN KENYA TO FACE SCUTINY OVER TAX ADVANTGES

A petition filed at the Milimani High Court seeks to compel the National Treasury and the Kenya Revenue Authority to disclose every tax exemption, customs duty waiver and fiscal concession granted to Chinese-financed infrastructure projects since 2008, including the Standard Gauge Railway, the Nairobi Expressway, the Thika Superhighway and Lamu Port.

The petitioners argue that these arrangements were embedded in contracts and administrative directives rather than published through Legal Notices, and are therefore unconstitutional under Articles 35, 201 and 210. They also want KRA to audit all duty-free equipment imported under the East African Community Customs Management Act since 2008, and want procuring entities barred from awarding future contracts priced on tax advantages unavailable to Kenyan contractors.

If the court grants the orders sought, Treasury and KRA would face disclosure obligations that reopen close to two decades of fiscal concessions to public scrutiny, with possible knock-on effects for pending and future Chinese-financed projects.

Even a partial win for the petitioners would put pressure on how future public-private infrastructure deals are structured and gazetted. The case matters to tax and procurement lawyers, compliance teams inside contractors bidding against Chinese firms, KRA's legal and audit functions, Treasury's public debt and PPP units, and any investor exposed to Kenya's infrastructure pipeline.

The immediate significance lies less in the outcome, which is months away, than in the fact that the opacity of tax concessions on bilateral projects is now a live constitutional question.

The petition was filed against a backdrop of over fifteen years of Chinese-financed infrastructure development in Kenya, much of it delivered through engineering, procurement and construction contracts that reportedly carried tax and duty concessions never published in the Kenya Gazette. The SGR, the Nairobi Expressway and the Lamu Port project are among the country's most visible public works, and all three are named directly.

The petition was filed against a backdrop of over fifteen years of Chinese-financed infrastructure development in Kenya, much of it delivered through engineering, procurement and construction contracts that reportedly carried tax and duty concessions never published in the Kenya Gazette. The SGR, the Nairobi Expressway and the Lamu Port project are among the country's most visible public works, and all three are named directly.

The petition raises questions that go beyond the named projects. If contract-embedded tax concessions without a published Legal Notice are found unconstitutional, the ruling could affect the structuring of every future bilateral infrastructure financing arrangement, not just Chinese-backed ones. It also raises a live procurement fairness question: were Kenyan contractors competing against foreign bidders who enjoyed cost advantages that domestic firms could not access. Treasury, KRA, KeNHA, Kenya Railways and the Kenya Roads Board will all need to consider their exposure regardless of how quickly the matter proceeds.

Kenya's constitutional framework on public finance is built around Articles 201 and 210. Article 201 requires openness and accountability in public finance, including public participation. Article 210 provides that no tax or licensing fee may be imposed, waived or varied except as provided by legislation, and that any waiver of taxes must be reported to Parliament together with reasons. Article 35 guarantees the right of access to information held by the state.

Tax exemptions and customs remissions in Kenya are ordinarily governed by the Tax Procedures Act, the East African Community Customs Management Act (EACCMA) 2004, and the Public Finance Management Act 2012. The Fifth Schedule to the EACCMA sets out categories of goods eligible for duty exemption, including items imported for donor-funded or government projects under specified items, among them Items 5, 6 and 10 referenced in the petition. Remissions and exemptions under these frameworks are typically expected to be anchored in gazetted Legal Notices, Treasury circulars, or specific project agreements ratified through appropriate instruments.

Large bilateral infrastructure projects financed by Chinese lenders, principally the Export-Import Bank of China, have historically been negotiated as government-to-government arrangements, with commercial and fiscal terms embedded in loan and contractor agreements. The degree to which these terms were subsequently published as Legal Notices, as opposed to being treated as confidential contractual matters, is the crux of the petitioners' claim.

Kenya's National Treasury has periodically published tax expenditure reports estimating the revenue foregone through exemptions across sectors, and the Auditor-General has in past reports flagged weaknesses in tracking duty-free equipment after project completion. The petitioners' demand for a KRA audit of imported vehicles and machinery echoes concerns that have surfaced before in Auditor-General reports on end-use monitoring of exempted goods, though this petition would, for the first time, force the question into a constitutional court process with binding disclosure orders sought.

Regionally, the EAC Customs Union framework governs how member states apply duty exemptions on capital goods for public projects, meaning any court finding on the domestic legal basis for exemptions could also touch on how Kenya applies its EAC obligations.

The petitioners' central legal theory is straightforward: a tax exemption or customs waiver that is not anchored in a published Legal Notice or other gazetted instrument is not law, and applying it anyway breaches Article 210's requirement that waivers be provided for by legislation and reported to Parliament. Kenyan courts have in prior tax disputes shown willingness to strike down administrative practices that lack a clear statutory foundation, particularly where public revenue is at stake.

If the court accepts that contract-embedded concessions without Gazette publication fall into this category, the ruling would not merely affect the four named projects. It would establish a precedent applicable to any bilateral or PPP arrangement structured the same way.

For Treasury and the implementing state agencies named, principally KeNHA, Kenya Railways and the Kenya Roads Board, this petition tests internal governance over how fiscal terms in bilateral financing agreements are approved, documented and disclosed. Boards and accounting officers at these entities will need to establish whether the concessions referenced were properly minuted, authorised at Cabinet or Treasury level, and captured in the entity's own contract registers.

Where documentation is incomplete, governance failure rather than deliberate concealment may be the more defensible explanation, but that distinction will matter little if the court simply orders disclosure and finds gaps.

KRA's compliance exposure is the most concrete. It is named as the party expected to produce a verified inventory of duty-free imports since 2008 under the Fifth Schedule items cited. Building that inventory, if ordered, requires KRA's customs and domestic taxes departments to reconcile import records against current asset location and usage, a task complicated by the age of some records and the possibility that equipment has since been sold, re-exported, or repurposed without proper notification. Compliance teams at contractors who benefited from these exemptions should expect requests for records confirming how imported equipment has been used and whether any conditions attached to the original waiver have been honoured.

This petition turns a long-standing but largely undocumented practice, tax and duty concessions embedded in Chinese-financed infrastructure contracts, into a constitutional question with potentially far-reaching consequences.

The core issue is disclosure: whether public money foregone through tax waivers on major projects was ever properly authorised and gazetted. Regardless of how the court rules, the case has already surfaced a governance gap that Treasury, KRA and procuring agencies will need to address. Decision-makers should treat this as an early signal to get their own documentation in order rather than wait for a judgment to force the issue.