Reprieve for London Distillers in Sh3 billion tax dispute

It was a sigh of relief for businessman Mohan Galot on Friday when the Tax Appeal Tribunal set aside Sh3 billion tax demand by Kenya Revenue Authority (KRA) from his company London Distillers.

The Eric Wafula-led tribunal ruled that the taxman did not justify its Corporation Tax, Excise Duty and VAT assessment it demanded from the company.

“KRA in its assessment notice concluded that the variance it arrived at was proof that the company’s declared turnover was understated. It, however, did not compute any tax on the variance,” ruled the tribunal.

KRA had issued its preliminary findings on July 3, 2020 to London Distillers seeking Sh2.6 billion taxes after analyzing the income declared vis-a-vis banking, income reconciliation, excise stamps reconciliation, input-output analysis of bottles and the overall taxable sales.

London Distillers however wrote to KRA clarifying on the issue of stamps of spirits and ready to drink products which had been raised by KRA in their findings.

The company further clarified on sales and banking analysis for 2017 and 2018 through a letter dated July 28, 2020 and a further letter dated August 18, 2020.

But in response, KRA requested the company for a breakdown of purchases of bottles which was submitted to it on the same day.

Four months later, KRA raised its assessment taxes to Sh3 billion which prompted London Distillers to appeal the decision.

In its appeal, the company accused KRA of failing to consider and appreciate clarifications it provided with respect to the impact of non-sales transactions as opposed to actual sales transactions in the banking analysis and findings.

According to London Distillers, KRA failed to properly address the grounds of objection it had raised with respect to excise stamps reconciliation, particularly the 024 per cent clarifications on actual volumes of production and the corresponding taxes.

“The Respondent has failed to recognise the fact that actual volumes of production of excisable goods is solely determined, accounted for and recorded on a daily basis by their factory-based monitoring staff and their own installed monitoring technology, and not the unorthodox methods it has resorted to,” argued London Distillers.