A Critical Assessment of the Taxation and Under-regulation of the Quarrying Subsector of the Mining Industry in Kenya

Abstract

Kenya has over the years sought to develop a robust legal and regulatory framework to govern the extractives industry. This dissertation critically examines the regulatory and tax framework governing Kenya's quarry subsector specifically, shedding light on inefficiencies and proposing remedies for sustainable growth. From the outset, it is imperative to note that administration, management, control, licensing and taxing of natural resources and mining activities is the exclusive prerogative of the National Government as envisaged by Article 62(1), 62(3), 185(2) and comprehended together with the Fourth Schedule and Article 209 of the Constitution. An elaborate taxation regime of the extractives industry is also provided for under parts I and II of the ninth schedule of the Income Tax Act (ITA). The regulation and taxation of mining as a function of the national government is further extensively buttressed by the Mining Act. The Act, however, only makes mention of the term ‘quarry’ in its definition section as an inclusion to what constitutes a mine. Further, the Act classifies minerals into different categories leaving out quarry products in its schedules, thereby allowing the National Government to levy general and or blanket taxes on the said products and activities. This misclassification fails to appreciate that quarry mineral products rank lower in value than precious metals and stones and as such should attract lower taxes and charges in line with sound economic principles. Consequently and as a by-product of devolution, county governments have been at the forefront of enacting county fiscal legislation to provide for revenue collection from quarry owners in the guise of building their economy and protecting the environment from the adverse impacts of quarrying exploits (both real and conceived). County Governments argue that to strike a balance between mitigating quarrying impacts on local communities and fulfilling the demand for aggregates, they need to impose such levies and or taxes on quarry owners. This thesis explores the repercussions of regulatory shortfalls, emphasizing the unconstitutional overreach by County Governments and scrutinizing the judiciary's role in interpretation and implementation. It further engages in a comparative analysis, evaluating legislative frameworks and institutional approaches in jurisdictions with robust sector-specific regulations, such as the United Kingdom and the Republic of The Gambia. It assesses the efficiency of selected best practices and discusses their applicability to Kenya's unique context.