KRA, Unilever Tea in Sh1.8bn tax battle

The Kenya Revenue Authority (KRA) is locked in a multibillion-shilling tax battle with Unilever Tea Kenya where it is seeking unpaid taxes dating back to the start the millennium.

The taxman issued the tea company—a subsidiary of Anglo-Dutch conglomerate Unilever—with a demand notice of Sh1.887 billion following an audit that revealed arrears in Value Added Tax (VAT), custom duties and penalties.

The Kericho-based company disclosed these contingent liabilities in its latest annual report for the year ended December 2014.

“The KRA has demanded payment from the group of Sh1.8 billion for alleged unpaid VAT including penalties and interest in respect of tea sold to third party exporters by Unilever Tea Kenya in 2000 and prior years,” reads the company’s financial statements.

Unpaid custom

Unilever has however countered the KRA’s claims that the tea was not exported. It primarily exports its tea to the United Kingdom, Pakistan and Egypt. Unilever is the maker of the ‘Lipton’ brand of tea.

The taxman is further demanding Sh41 million in unpaid custom duties together with penalties amounting to Sh46 million relating to tea traded between 1999 and 2001.

The tea company successfully quashed this demand through a court battle but the KRA has since appealed the matter. “The appeal is likely to take a considerable period of time to be decided because of the congested court diary,” Unilever said in its 2014 annual report.

KRA, whose collections for the first quarter ended September missed target by a whopping Sh28 billion, has been tussling with various companies as it struggles to meet targets.

High pricing

Unilever Tea dipped into the red with a loss of Sh677 million in the period to December 2014 compared to a net profit of Sh654 million a year earlier, despite a strong greenback and high pricing of the commodity in the world market.

Revenue dipped by a fifth to Sh5.55 billion blamed on lower tea volumes harvested due to poor rainfall and a decrease in area under mature tea.

The group’s tea harvest of green tea leaf stood at 103.5 million kilogrammes last year compared to 114.1 million kilogrammes in 2013, a decrease of a tenth.

“If weather and market conditions continue to improve, then 2015 is expected to also improve,” said Duncan Stickler, Unilever Tea chairman and managing director.

Unilever Tea delisted from the Nairobi Securities Exchange(NSE) in January 2009 after its main shareholder, Brooke Bond, bought out minority shareholders.

It owns a 52 per cent majority stake in Limuru Tea Company which is listed on the NSE.