Tanzania-based Bakhresa Group, which owns one of the largest flour mill in the country, has suspended exports to Kenya citing frequent changes in tax rules.
The firm, a well-known family-owned business founded by tycoon Said Salim Awadh Bakhresa, says frequent changes in tax rules have slowed its exports to Kenya and led to losses running into millions of shillings.
“The Kenya Revenue Authority (KRA) has in recent months surprised us with sudden changes that end up increasing our tax liability six fold,” its export manager Yasini Billo said, claiming the changes usually aren’t communicated to importers until products get to the border.
“We see the hidden hand of competition in all this since our products do not encounter similar restriction in the other East Africa Community (EAC) markets that we export to.”
The Group, with a turnover of more than Sh80 billion, produces flour, carbonated soft drinks, dairy products, water, packaging material and petroleum products. It also owns a ferry transport service and runs a pay TV.
Apart from Tanzania, the firm has operations in Kenya, Uganda, Malawi, Mozambique, Zambia, Rwanda, Burundi and South Africa. The decision to suspend flour exports to Kenya comes just weeks after the KRA detained its truckload of flour at Namanga border.
The flour, under Azam brand, is made of wheat imported under East Africa’s 10 per cent duty remission scheme.
While the same scheme is available to Kenya’s flour processors, KRA has lately imposed 25 per cent duty on such products, ostensibly on reciprocal response to similar treatment of palm and industrial sugar-based products from Nairobi by the Tanzania Revenue Authority.
Mr Billo said the tax dispute has wrecked the firm’s bottomline as duty demanded per truck of goods has increased six times.
“We have decided to suspend further export of wheat flour to Kenya until the dispute is fully resolved”, Mr Billo said, adding the group’s subsidiary in Nairobi is however continuing with its normal operations.
Sources have however intimated to the Business Daily that the row between the KRA and Bakhresa extends beyond the bilateral tax disputes.
KRA is said to have revaluated the firm’s products on suspicion that it has been exploiting the transfer pricing loophole to cut its tax liability.