The Kenya Revenue Authority (KRA) has responded to a report that exposed a potential tax discrepancy running into billions of shillings involving the British American Tobacco Kenya (BAT Kenya).
The report published by the University of Bath’s Tobacco Control Research Group, in collaboration with The Investigative Desk and Tax Justice Network Africa, highlights the potential $28 million (approximately Ksh3.62 billion) tax discrepancy involving BAT Kenya for the fiscal years 2017 and 2018.
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KRA in a statement on February 19, 2025, said that it is committed to upholding the integrity of Kenya’s tax system, further adding that it is currently reviewing the findings of the report.
“KRA 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,” read part of the statement.
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“Our mandate is to ensure that all corporations operating within Kenya comply fully with tax regulations, and any evidence of tax avoidance or evasion will be addressed with the utmost urgency.”
At the same time, the authority said that it appreciates the role of independent research organizations in promoting transparency and accountability.
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KRA responds after BAT Kenya dismisses report
The statement by KRA comes after BAT Kenya dismissed the reports of tax evasion and profit under-declaration.
Also Read: Layoffs Loom as BAT Kenya Announces Restructuring
The report by the Investigative Desk analyzed six years of annual reports by the cigarette maker and compared this to production data the company supplied to KRA, internal government documents, and data on cigarette consumption and prices.
However, the Nairobi Securities Exchange (NSE)-listed cigarette manufacturer’s Managing Director Crispin Achola on Tuesday dismissed the claims as “conjecture” and accused the investigative team of misrepresenting the company’s operations.
While dismissing the claims, Achola stated that BAT Kenya’s financial reports comply with local regulations and international standards and are audited by external firms as well as regulators.
“BAT Kenya unequivocally and firmly rejects the allegations made, including those regarding the discrepancy between the Company’s published financial disclosures and data referred to in the report,” said Achola.
“It is disheartening to see that The Investigative Desk chose to ignore the facts in favor of sensational and misleading reporting. BAT Kenya is weighing its options regarding the impacts of this erroneous reporting.”
Achola argued that as a public company listed on NSE, BAT Kenya publishes financial disclosures in its annual reports and audited financial statements in line with the applicable local regulations and international reporting standards.
BAT Kenya’s MD speaks
Further, the MD said that the company’s books are audited by both its external auditor and the regulator, including in 2017 and 2018, the years in question per the report.
“BAT Kenya acknowledged having received a request from The Investigative Desk for comment on matters covered in the report in June 2024.”
Also Read: KRA Issues Directives on New Tax Exemption Rules
The cigarette manufacturer, however, said that queries by The Investigative Desk did not include the methodology used to analyse BAT data.
“We provided our position and advised that their claims would result in grossly overstated figures. Worryingly, in efforts to reconstruct BAT Kenya’s numbers for their analysis, the authors of the report proceeded to apply erroneous assumptions in their calculation of the Company’s revenues, profit, and tax due for cigarette sales,” Achola added.
In addition, BAT Kenya said that the erroneous assumptions include the use of incorrect prices, a disregard of applicable trade margins and costs deductible.
Report
The Investigative Desk report said that the financial statements of the cigarette manufacturer are riddled with contradictions and discrepancies.
The report claims that for instance in 2017, BAT Kenya 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.
Using six years of BATK’s annual reports, production data supplied to KRA, government documents and data on cigarette consumption and prices, the report exposed numerous contradictions.
“These include millions of cigarette packs unaccounted for, leading to revenues and therefore tax that would normally be expected,” the report reads in part.
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