Kenya: BAT Kenya Hit Hard By Smuggling

Source from:  East African Business Week 03/17/2010

Multinational cigarette maker British American Tobacco (BAT) Kenya is calling on the Kenya Revenue Authority (KRA) to improve its tax collection methods to cut down on the level of illicit cigarette trade. The sentiments come at a time when the counterfeit trade has reached its peak in Kenya with pundits saying the Kenyan economy could be losing $2.6 billion annually as a result. President Mwai Kibaki said the government would increase surveillance to ensure that it reins in those involved in illicit trade that threatens leading Kenyan industries. BAT Kenya Managing Director Gary Fagan said last week there has been an increase in diversion of transit export goods into the local market that has affected the company's business. "This is what we call round tripping where goods we thought are out of the country find their way back," Mr Fagan said. The comments come barely a week after BAT cigarettes worth $350,000 meant for export were impounded en route back into the Kenyan market. He said the practice led to a five percent reduction of the total cigarette market in the country in 2009. A recent industry report shows that illicit trade in cigarettes accounts for 12 percent of the total consumption in Kenya. One way of cutting down on the vice, he said, is collection of taxes from the border entry points. Mr. Fagan said this would put off unscrupulous traders finding it easy to re-route export cigarettes. BAT Kenya serves as a hub for 16 African countries most of which are landlocked and import directly from Kenya, which has seen some traders diverting transit goods. The practice is said to cost the government an estimated Sh5 billion annually. Fagan was of the opinion that the country lacked stiff penalties to discourage the trade. The situation is complicated even further because cases involving illicit trade are mostly handled by the magistrate courts, which hand out lenient penalties. Enditem