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Taxman probes distillers in Sh3.9b tax evasion claims

By Anthony Mwangi
Wednesday, September 30th, 2020
Halima Haji arranges drinks at Lasida Grill Bar and Restaurant in Nakuru, yesterday. Photo/PD/Raphael Munge
In summary

Kenya Revenue Authority (KRA) is investigating 10 distillers over Sh3.9 billion tax evasion claims.

The firms are Patiala Distillers (K) Ltd, London Distillers, Crystal World, Zheng Hong (K) Ltd, Vivek Investments Ltd, Vinepack Limited, Crywan Enterprises Ltd, Al-garve Distillers, FRM EA Packers Ltd and Tihan.

A report tabled by the Finance and Planning Committee, before Parliament indicates that the firms have not been meeting their taxes obligations.

According to the report, in the probe that covered the period between January 2019 and March this year, KRA established that directors of two other firms; Platinum Distillers Limited and Two Cousins Distillers Limited evaded tax worth Sh845 million.

 Platinum Distillers had Sh479 million in undeclared volumes of stamp usage for ethanol with Two Cousins Distillers in hot soup for the unaccountable stamps and unreported production worth Sh366 million.

“Regarding the companies under query, the authority has identified various non-compliance issues through tax returns review, investigations, audits and enforcement and has taken appropriate interventions including tax recovery measures and prosecution,” KRA document says.

Tax collector has been undertaking interventions to shut tax evasion loopholes as well as cast its net wide to raise at least Sh1.62 trillion as projected by the National Treasury to finance the Sh2.79 trillion budget for the 2020/21 financial year.

Target is a 14 per cent drop compared to the Sh1.88 trillion in 2019/20 financial year.

Already, the government is faced with a challenge of meeting its revenue target as Covid-19 pandemic bites.

Ruaraka MP Tom Kajwang had sought the involvement of KRA on the tax evasion and repackaging of alcoholic beverages by several local companies.

Tax laws allow taxpayers to make self-assessments and pay the applicable taxes.

Directors charged

In the case of non-compliance, KRA is empowered under the laws to review such assessments and recover unpaid taxes as well as prosecute where fraud is established.

Already, African Spirits and Keroche Breweries have had their directors charged in court for alleged tax evasion offences.

Africa Spirits Limited is on the spot over a tax debt of Sh41.7 billion in unaccounted stamps, production bottles and machine capacity.

Naivasha-based Keroche Breweries has a Sh14.4 billion tax evasion case in court over undeclared spirits and beer volumes in stamps for Vienna rate Variance.

KRA is also investigating 15 companies for under-valuation of imported bottles worth Sh401.75 million in taxes.

The report  notes that from January 2019 to March 2020, KRA recovered Sh23.59 billion through interventions at the country’s points of entry.

About Sh15.97 billion was paid to KRA through post clearance interventions including penalties, alteration fees, import duties, VAT taxes and licensing.

Document further notes that although KRA had projected to collect Sh1.96 billion in excise duty for the 48.11 million bottles the firms purchased locally from Torrent East Africa and 16.08 million imported, only Sh1.64 billion was realised.

 “This amount is higher than the excise duty paid providing insight for our compliance teams to institute various interventions,” KRA says in the document before the House.

These interventions include; compliance checks, enforcement, audits, in-depth investigations and persecution.

Applicable rate of excise duty after rebate for the quantities sourced locally was at Sh29 per 250 ml bottle with imported ones at Sh35 per 250ml bottle. 

KRA has already employed interventions to curb against tax evasion. 

They include patrols and surveillance of porous borders, 100 per cent verification and laboratory testing of suspected containers, interceptions and seizures of any smuggled ethanol and intelligence liaison with other government agencies such as National Police Service, National Intelligence Service and  county governments.

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