New report reveals potential $28 million tax discrepancy involving British American Tobacco in Kenya

New research has revealed evidence suggesting British American Tobacco Kenya (BATK) may have avoided or evaded up to $28 million in profit taxes in Kenya.

The analysis, written by The Investigative Desk, published by the University of Bath's Tobacco Control Research Group (TCRG), in collaboration with Tax Justice Network Africa, highlights a $93 million discrepancy (KES9.6 billion) in revenue reported by BAT Kenya (BATK) for 2017 and 2018, with no plausible explanation provided by the corporation. This gap could reflect tax avoidance or evasion, raising urgent questions about BATK’s financial practices in the region.

Using six years of BATK’s annual reports, production data supplied to the Kenya Revenue Authority (KRA), government documents and data on cigarette consumption and prices, the report exposes numerous contradictions. These include millions of cigarette packs unaccounted for, leading to revenues and therefore tax that would normally be expected.

Tax and audit experts reviewing the findings called on BATK and the KRA to provide answers.

Leopoldo Parada, Reader in Tax Law at King’s College London, said: “In the absence of a convincing explanation, this looks like tax avoidance and potentially evasion.”

Kennedy Waituika, Director of Audit and Assurance at TradeMark Africa, said: “This report should at least trigger a tax review of BAT. It should be a wake-up call for the KRA.”

A spokesman for BAT Kenya did not provide a credible explanation for the discrepancy but rejected the allegations and, in a statement, said:

“BAT Kenya firmly rejects all the allegations made regarding the discrepancy between its published financial disclosures and data. The company pays all taxes in line with applicable laws.”

Lacking an explanation by the corporation, the report authors have asked the Kenya Revenue Authority (KRA) if they will investigate. The authority has not responded to a request for comment.

Dr Andy Rowell from TCRG said:

“The colonial legacy of profiting from Africa while evading responsibilities continues. It’s time for accountability. If this is happening in Kenya, it begs the question of whether similar practices are occurring in other jurisdictions, including the UK and the US.”

Dr Rob Branston from TCRG said: “The findings of this report reveal a troubling pattern of financial discrepancies that demand urgent investigation. Transnational corporations like BAT Kenya have a duty to pay their fair share of taxes, especially in countries where they profit significantly. This is a stark reminder of the need for stronger regulation and enforcement to prevent companies from exploiting tax systems to the detriment of public resources and development. We hope this report spurs action not just in Kenya, but across the region and beyond.”

Dr Marcel Metze of The Investigative Desk said: “We have been investigating the tax practices of the big transnational tobacco corporations for years now. In our investigations, we keep finding lack of transparency, opaque fiscal structures and consistent tax planning practices which can be labelled as ‘aggressive’. The results of our study raise serious doubt about the correctness of company’s financial reporting and do warrant further investigation by the financial authorities.”

Bob Blackman MP who is the Co-Chair of the APPG on Smoking and Health said:

“This newly published research raises serious questions about British American Tobacco’s activities in Kenya indicating that it may have avoided or evaded paying significant amount of tax. In addition, there remain questions about BAT’s wider activities in Africa, including over potential bribery and surveillance. The Serious Fraud Office should re-open its investigation into BAT in order to examine the latest evidence.”

This report builds on The Investigative Desk and  TCRG’s 2020 publication, Big Tobacco, Big Avoidance, which revealed the tax avoidance practices regularly employed by the transnational tobacco companies.     

The project was funded jointly by the Tobacco Control Research Group and The Investigative Desk.