Investigative report unearths potential Sh9.6 billion tax avoidance by BATK between 2017 and 2018
Analysis results in the revenue of BATK being substantially lower than what it could have earned based on what it produced
British American Tobacco Kenya (BATK) was unable to account for up to Ksh9.6 billion (US$493 million) between 2017 and 2018, an audit of its revenue statement indicates.
According to an analysis filed by Investigative Desk in Amsterdam, the company did not provide a plausible explanation, which could indicate tax avoidance or evasion of up to US$428 million in profit tax.
The Investigative Desk is a group of specialised journalists, based in Amsterdam, the Netherlands, with a focus on large multinational corporations in a range of economic sectors.
The desk analysed six years of annual reports by BATK 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 analysis reveals numerous contradictions and massive discrepancies in the company’s statements, which indicates that there was a massive discrepancy of millions of cigarettes between what the company produced and said it sold.
This results in the revenue of BATK being substantially lower than what it could have earned based on what it produced. However, what exactly happened to these millions of cigarette packs remains a mystery.
According to the Investigative Desk, experts who reviewed the findings in the report called on BATK to explain and the Kenya Revenue Authority to investigate.
The analysis indicates that there was any incident of tax avoidance or tax evasion. However, the company has not been able to provide an explanation for this discrepancy, which makes the findings of this report look like ‘tax avoidance at the very least and possibly evasion,’ Reader in Tax Law at King’s College London Leopoldo Parada said.
Kennedy Waituika, an expert on fraud and internal audits and Director of Audit and Assurance at TradeMark Africa, said the challenge is now on BAT to explain. BATK refused to answer questions by The Investigative Desk.
“BAT Kenya firmly rejects all the allegations made regarding the discrepancy between its published financial disclosures and data,” a spokesperson said.
“The company pays all taxes in line with applicable laws.” BATK did not provide a credible explanation for the discrepancy and refused to share more financial information, which it said is “commercially confidential. This report should at least trigger a tax review of BAT,” Waituika said. “It should be a wakeup call for the KRA,” he said.
BATK is one of the most profitable firms in Kenya that portrays itself as a responsible company contributing to the economy and paying its fair share of tax. Research has shown that the damage of tobacco consumption to the Kenyan economy is eight times higher than what BATK reports in profit.
The Investigative Desk report indicates that BATK produced more than it sold. It claimed the sales have gone down faster than market or consumption data would support, and there is a massive discrepancy between the value of its production and the revenue it reported.
