KRA accuses Colgate Palmolive of import tax evasion

Kenya Revenue Authority (KRA) has accused Colgate Palmolive of colluding with one of its sister companies to evade tax.

The accusations were made in a court dispute in which Colgate Palmolive East Africa (CPEA) is challenging a decision by the customs office to raise taxes payable on its products imported in March last year. CPEA has been importing products from subsidiaries of its parent company, Colgate Palmolive, which is listed on the New York Stock Exchange.

The customs office has accused CPEA of using the relationship with its subsidiaries to understate the value of imports to pay less duty. The customs office says it made the discovery after scrutinising CPEA’s entries for clearance of imports. Some of the declared prices differed with the entries.

“A physical verification and examination of the goods lodged via some entries established that CPEA was declaring different values for identical goods,” said the commissioner of customs in court papers.

The customs office further accused CPEA of admitting in one of its responses that the relationship with its parent company influenced the price of the products. In the said form, CPEA had also been asked whether it was related to the suppliers and whether the transaction value of the imported goods was approximate to the customs value.

“The commissioner of customs, therefore, conducted a market survey of similar goods. The values declared were extremely low compared to the local market survey conducted,” added the commissioner of customs.

The price of each piece had been quoted at Sh54 compared to Sh87 found during the said market survey, according to the customs office.

CPEA, however, denied the allegations, arguing that the company had since 2006 stated in its import papers that the products were from subsidiaries of its parent company. The firm further argued that the the amount paid in duty was approximate to the customs office’s figures, which is proof that the allegations are false.

CPEA has also poked holes into the market survey allegedly carried out by the customs office saying it had not stated which branches of supermarkets it visited. “The respondent has admitted through its own report that it was aware as far back as 2009 that CPEA was importing products from related companies,” CPEA said.

The firm’s lawyer Nazima Malik faulted customs for haphazardly uplifting the cost of duty, saying that no due notice was given to the company. The hearing will resume in October before Lady Justice Mumbi Ngugi.