The Kenya Revenue Authority (KRA) investigators have raided the offices and warehouses belonging to the local agents of the world’s largest cigarette maker from China as part of preliminary investigations into tax fraud.
The probe, carried by KRA’s Investigations and Enforcement —a unit that pursues high-stakes white-collar inquests — has seen the taxman conduct multiple raids at Yulees Blooms Company Ltd and Shapo Trading Ltd offices and warehouses in Kilimani and on Mombasa Road.
The probe targets the local agents of the world’s largest cigarette manufacturer, state-owned China Tobacco, which supplies the Kenyan market with Septwolves and Harmonization brands out of its more than 900 products that generated sales of $210 billion (Sh27.1 trillion).
The KRA investigation follows a whistleblower report that Shapo Trading has been declaring lower purchase prices for its imported products, allowing the firm to pay less import duty on its shipments, according to investigators who spoke to the Business Daily.
A preliminary investigation does not imply criminal charges and does not necessarily lead to a trial.
Consumption of Chinese-made cigarettes in the Eastern Africa region has been on the rise following the proliferation of Chinese nationals in Kenya, with some trying to earn a living selling goods in corner shops.
To shore up revenue, President William Ruto’s administration has stepped up its crackdown on tax cheats and it is expected to become more aggressive following the withdrawal of this year’s Finance Bill after deadly protests that left more than 50 people.
A KRA official confirmed to the Business Daily that there have been more than two raids on business premises operated by the two companies, the most recent being in October.
All three mobile phone numbers listed by the two Chinese-owned companies in their contact details with the Business Register Services were switched off.
‘It’s confidential’
On Monday, Liu Yuhang, director of Shapo Trading, asked that we send him questions on text, but he did not respond. He neither picked calls nor responded to text messages on Tuesday.
KRA declined to provide details about the probe amid claims of collusion between the firm and officials at the authority.
“Section 6 of the Tax Procedures Act 2015, provides that information obtained in the course of administering tax laws is confidential and hence cannot be shared with third parties without the express consent of the person to whom the information relates,” said KRA in an email response on Wednesday.
A top official at KRA reached out to this writer promising to set up a meeting with a manager at Shapo Trading after Business Daily sent questions to the Chinese cigarette firm.
Shapo Trading Ltd mainly imports two cigarette brands – Septwolves and Harmonization – into Kenya. Some of the products are then transported to Uganda and Tanzania.
Yulees Blooms is the local sales agent, which distributes the imported products and ships part of the consignment to the other two East African countries.
KRA agents visited Shapo Trading’s office at Galana Plaza in Kilimani on October 18, and perused various documents in search of evidence.
On October 22, the taxman’s agents visited a Shapo Trading warehouse along Mombasa Road as part of the investigation.
A KRA official, who requested not to be named, said the taxman recently held a formal meeting with the two companies to discuss the tax evasion allegations, which Shapo Trading and Yulees Blooms denied.
The taxman was pursuing whistleblower reports indicating that Shapo Trading had been declaring the purchase price of each carton of Septwolves at a discount of $278 (Sh35,000).
For the premium Harmonization brand, Shapo Trading has been declaring the cost at lower than the quoted price of $1,900 (Sh245,000), said the whistleblower.
The two brands are manufactured by China Tobacco, which enjoys a monopoly in the East Asian country, controlling over 90 percent of the cigarette market.
China is bucking global smoking trends as cigarette sales soar in the country, fuelled by China Tobacco—which has expanded its global reach to over 20 countries through sales offices and manufacturing plants.
Business Registration Service records show that Shapo Trading was incorporated in February, 2023 and is owned by Double Lucky Investment Company Ltd.
Double Lucky Investment Company Ltd was incorporated in November, 2021 and is wholly owned by Yuhang Liu, a Chinese national.
Mr Liu is the sole director of both Shapo Trading and Double Lucky Investment Company Ltd.
Yulees Blooms Company Ltd is wholly owned by Yulan Lei, another Chinese national, who is the sole director.
Felix Kikuyu Kimoli is listed as the company secretary in both Shapo Trading and Yulees Blooms.
