Listed cigarette manufacturer BAT Kenya has dismissed allegations in a recent investigative report that there are extensive discrepancies in its financial statements for 2017 and 2018.
- •The report, titled Missing Millions: A Cross-Examination of British American Tobacco Kenya’s Tax Bill was published last week by The Investigative Desk, in collaboration with the Tobacco Control Research Group (TCRG) and Tax Justice Network Africa (TJNA).
- •Investigators allege that BAT Kenya may have underreported revenue by up to KSh 9.6 billion (US$ 93 million), potentially resulting in a tax shortfall of US$ 28 million.
- •BAT Kenya, a subsidiary of one of British American Tobacco, has denied these allegations, calling them baseless, inaccurate, and ‘largely speculative.’
The report is based on a detailed analysis of six years of BATK’s annual reports, cross-examined with production records submitted to the Kenya Revenue Authority (KRA), internal government documents, and cigarette consumption and pricing data.
According to the researchers, there was a gap of up to KSh 9.6 billion between the company’s declared revenues and the estimated revenues based on production and sales data. This discrepancy suggests that millions of cigarette packs were either unaccounted for or underreported.
“This report should serve as a wake-up call for the Kenyan authorities. If these discrepancies remain unexplained, they could indicate tax avoidance or even evasion,” Kennedy Waituika, a fraud and internal audit expert said.
In an emailed statement, BAT Kenya Managing Director Crispin Achola dismissed the allegations, asserting that the company adheres to all applicable tax laws and financial reporting standards.
“We have conducted a thorough review of the report and found it to be largely speculative, containing numerous errors and misrepresentations of BAT Kenya’s operations,” Achola said.
“As a public company listed on the Nairobi Securities Exchange, BAT Kenya publishes financial disclosures in its Annual Reports and audited Financial Statements in line with the applicable local regulations and international reporting standards.”
The listed tobacco company added that the authors of the report used incorrect assumptions, including miscalculating the company’s revenues, profits, and tax obligations. This includes the use of incorrect cigarette prices, a disregard for applicable trade margins, and failure to account for deductible costs.
The allegations against BAT Kenya come at a time when governments worldwide are increasingly scrutinizing the tobacco industry’s practices, particularly in low- and middle-income countries.
“Tax is one of the most effective measures for addressing the tobacco epidemic. The money made from selling products in Kenya should remain in Kenya to help the country deal with the harms of smoking, not line the pockets of tobacco industry executives,” Dr. Rob Branston, a tobacco taxation expert said in the report.
Tobacco companies have been accused of using complex corporate structures and transfer pricing mechanisms to minimize their tax liabilities, depriving governments of revenue that could be used to fund public health initiatives.
