Kenya Revenue Authority (KRA) has vowed to investigate British American Tobacco (BAT) Kenya over credible allegations of massive tax evasion following an international research firm expose.
In a press release on Wednesday, KRA Commissioner for Domestic Taxes said that “KRA takes note of recent report published by the University of Bath’s Tobacco Control Research Group in collaboration with the Investigative Desk and the Tax Justice Network Africa, highlighting a potential $28 mn (Sh3.6 bn) tax discrepancy involving BAT Kenya financial years 2017 and 2018.
KRA says it “takes these allegations seriously and is committed to upholding the integrity of Kenya’s tax system. We are currently reviewing the findings of the report and will take appropriate action”
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As expected, BAT Kenya has already dismissed reports of tax evasion and profit under-declaration of Sh3.6 bn.
The expose uncovered a $93 million (Sh12.1 billion) discrepancy in revenue reported by BAT Kenya for 2017 and 2018.
The report by Investigative Desk analysed six years of annual reports by the cigarette maker and compared this to production data the company supplied to the Kenya Revenue Authority (KRA), internal government documents, and data on cigarette consumption and prices.
The Investigative Desk report said that the financial statements of BAT-K are riddled with contradictions and discrepancies.
“The company claims it sells fewer and fewer cigarettes every year. Data obtained by The Investigative Desk on BATK’s production shows that it produced much more than it claims to have sold,” the report reads in part.
The report claims that for instance in 2017, the cigarette maker said in its annual report that it sold seven per cent less cigarettes.
While production data shows that it actually manufactured 2.3 per cent more cigarettes. “Their estimated retail value amounts to Sh13 billion (around 126 million USD at the then-current exchange rate (Sh76), which is 37 percent more than the Sh9.5 billion in revenue the company reported in its annual reports),” the report reads in part.