•The taxes include excise duty, VAT, Pay As You Earn(PAYE) and corporation tax , with the increase coming as a result of the inflationary increase in excide duty rates.
•The company’s gross revenue increased by three per cent to Sh40 billion.
Image: COURTESY
Taxes paid to government by tobacco products manufacturers and dealer–BAT increased by Sh2 billion or 18 per cent in the year ended December 31, its financial results show.
The government made Sh18 billion in the form of excise duty , VAT, Pay As You Earn(PAYE) and corporation tax , with the increase coming as a result of the inflationary increase in excide duty rates, as well as the VAT and corporation rate changes effected in January 2021.
During the period under review, British American Tobacco Kenya (Plc) reported an 18 per cent jump on profit after tax to Sh6.5 billion.
This was driven by the increase in net revenue, effective cost management and offset by higher corporation tax in line with rate changes, management reported.
“The growth in profitability is reflected in higher earnings per share (+18%), aligned to our commitment to deliver sustainable shareholder value,” it says in its financials.
Gross revenue increased by three per cent to Sh40 billion, primarily driven by pricing benefit in the domestic market.
This revenue growth was however marginally reduced by lower export sales, attributable to slower economic recovery in some of the key markets.
The growth in revenue was off set by a Sh1.1 billion (8%) increase in excise duty and VAT , following the inflationary increases in excise duty rates and VAT changes.
Consequently, net revenue increased marginally by 0.4 per cent to Sh25.4 billion.
During the year, a property valuation exercise was done in line with the company’s accounting policy, resulting in a gain of Sh1.2 billion in other comprehensive income.
The board has proposed a final dividend in respect of the year ended December 2021 of Sh50 per share to be recommended for approval by shareholders at the Annual General Meeting set for May 24.
The final dividend, when added to the interim dividend already paid, gives a total dividend of Sh53.50 per share.
BAT however notes a continued prevalence of illicit trade in tax-evaded cigarettes, estimated at 22 per cent, which remains a significant challenge and continues to adversely impact legitimate industry revenues.
Illicit trade in tobacco products is denying the government more than Sh4 billion per annum in taxes.
“It therefore remains crucial for industry players to work with relevant government agencies to contain flows of illicit trade,” the NSE listed firm says.
High taxation in Kenya is pushing traders to source cheaper goods from neighbouring countries, according to the Kenya Association of Manufacturers says.
This is mainly from Tanzania, Uganda, and Ethiopia, with residents near borders preferring to shop and consume products across the border, mainly excisable goods.
According to Kenya’s Anti-Counterfeit Agency (ACA) illicit trade denies the taxman up to Sh153.1 billion annually.
The country is also losing between Sh85 billion and Sh100 billion annually to counterfeiting activities alone.
“As we increase taxes, the level of illicit trade in the market also increases,” KAM chief executive Phyllis Wakiaga told the Star in a recent interview , warning that the government will lose revenues.
KAM has been advocating for the inflation adjustment to be withheld this year to support recovery from the impact of the Covid-19 pandemic.
Excisable goods include juices, mineral water, alcoholic beverages, cigarettes, motorcycles, chocolates and sugar confectionery.
“Our challenge is that for some of the products, the cost is significantly higher compared to our neighbours,” said Wakiaga, “There is a growth in illicit trade in the country as the cost of products continues to rise.”
The neighbouring East Africa Community partner states, which also have inflation adjustments, have be not been adjusting in recent times, KAM notes.