British American Tobacco Company has expressed worries over an influx of illicit cigarette trade as it sinks Sh 2.5 billion to manufacture nicotine pouches in the Kenyan market.
The giant cigarette maker said the new investment was part of its commitment to reducing the health impact of its business, but was much concerned by a rise in the volume of tax-evaded cigarettes coming into Kenya across the Ugandan border.
Non-Kenyan tobacco leaf accounts for the largest volume of illicit traded cigarettes which the company estimates now accounts for approximately 90 per cent of all tax-evaded cigarettes sold in Kenya.
“Despite this investment and strong business performance, BAT Kenya remains concerned by the impact of illicit trade in Kenya, where one in ten cigarettes now smoked is illegal,” said BAT Kenya’s Managing Director, Beverley Spencer-Obatoyinbo during the company’s 68th Annual General Meeting (AGM).
The meeting was held electronically owing to COVID-19 Government restrictions on public gatherings.
The Sh2.5 billion tobacco-free nicotine pouches production plant is aimed at reducing the risks associated with passive smoking. This Oral nicotine factory is expected to increase BAT’s manufacturing and exports footprint, create more jobs, and meet the needs of Kenyan consumers for greater choice, more innovation and less risk.
“The illegal sales are therefore adversely impacting, not just government revenues and local manufacturers, but also Kenyan tobacco farmers by impacting demand for Kenyan leaf,” said Spencer-Obatoyinbo .
“Tobacco taxes declined in 2019, despite a significant increase in excise duty. This confirms the reality that increased tobacco excise is no longer translating into increased government revenues in Kenya.”
BAT now want Kenyan authorities to increase border controls and enhance their cooperation with their Ugandan counterparts to stem the flow of these products into Kenya and stomp out the criminal tobacco trade.
“Kenya’s ratification of the WHO’s Illicit Trade Protocol (ITP) was an important step towards combatting the illicit trade. It’s also vital that our neighbours in the East Africa Community expedite ratification of the ITP,” said Spencer-Obatoyinbo.
The Vulnerability Tracker launched Wednesday will help authorities in different countries to detect channels that pose the greatest risk to economic development in the war against illicit trade.
“A key challenge to tackling illicit financial flows is the difficulty countries face in identifying which financial flows carries the largest risk to their economies,” said TJN on its website.
Kenya has been losing an average of Sh40 billion every year through illicit financial flows since 2011, according to 2018 pasgr.org, report dubbed ILLICIT FINANCIAL FLOWS IN KENYA: Mapping of the Literature and Synthesis of the Evidence.
Government, local firms and multinationals are said to be on the forefront in fraudulent schemes to avoid tax payments.
In Kenya for instance, tax evasion through IFFs occur mainly through mis-invoicing, transfer pricing, trade in contraband goods, corruption and trafficking of persons and drugs.
BAT shareholders have ratified a final dividend of Sh 30.00, bringing the total dividend for 2019 to Sh 33.50 per share.