INVESTIGATIONS

BIDCO’S Long Battle With KRA Over Tax Evasion

It is one of Kenya’s top manufacturers of edible oils but built on a shaky ground of tax evasion, fraud among other accusations.

Over the years, Vimal Shah’s Bidco Africa Ltd, has managed to stay afloat despite a flurry of lawsuits and at one time, ignored several demonstrations in Nairobi.

ALSO READ: Vimal Shah- the Man Behind Vicious Fight With KRA 

The firm is currently being investigated for alleged tax evasion, which runs into billions of shillings and alleged mistreatment of its employees.

Last year, activist Okiya Omtatah moved to court seeking to compel the company to honour its tax obligations.

But as the case and many more are still pending in court, more revelations are emerging into how the firm has been employing crooked means to evade payment taxes over the years.

In Omtatah’s case, the activist wanted the firm forced to pay overdue tax. This was a follow up of a decision of the High Court, which dismissed BIDCO’s case. Omtatah wanted the firm to pay the amount plus the interest and penalties, which he said remains uncollected to date.

The activist claimed the firm has been colluding with senior government officials to evade tax.

BIDCO PRODUCTS

BIDCO PRODUCTS

The company started having a run-in with the tax collector close to a decade ago, when it secured a contract to import edible oils and related products from Josovina Commodities Limited in Singapore.

But when KRA carried out an audit into BIDCO’s imports for the years January 2004 to July 2008, it found that the firm had undervalued value added tax and duty payable.

KRA accused the manufacturer of tariff misclassification and value undervaluation. Although BIDCO disputed the allegations and objected to the methodology and parameters used to assess import duty, its quest for the dismissal of the case was not successful.

Since then, there has been a flurry of lawsuits as the amount due to the taxman getting more and more. In Parliament, Kiambu Town MP Jude Njomo filed a petition showing alleged tax and labour irregularities.

More investigations reveal that the fraud, which is documented in customs records from 1992 to 1998 – a period when CEO Vimal Shah has referred to as the entrepreneurial beginnings of Bidco – was centred on the importation of tax free goods with the approval of the Export Promotion Programmes Office (EPPO).

Vimal Shah, CEO Bidco

Introduced in 1994, the EPPO allowed manufacturers to apply for duty exemption on raw materials to be used in manufacturing goods for export.

The petition in Parliament, filed by 12 applicant, accuse the Thika-based company of subjecting it’s workers to poor labour conditions. The firm has allegedly classified the bulk of its 2,500 workforce as casual workers, to ostensibly get cheap labour and avoid regulatory payments due to the government.

The petitioners also accuse the company of limiting shifts at its factories to avoid paying workers’ contributions to the statutory National Social Security Fund and the National Hospital Insurance Fund.

The employees also complained of harassment and unfair treatment of workers as well as poor working conditions. The company has further been accused of importing large quantities of “Refined, Bleached & Deodorised” palm olein, known as RBD, and palm stearin, on which no duty or VAT were paid. RBD palm olein and stearin are obtained from fractionating refined palm oil to separate liquid parts (olein) from solid parts (stearin). They are also considered finished goods by Legal Notice 146 of 1993 of the Customs and Excise Regulations, and as such do not qualify for duty remission.
as part of the plan to evade tax obligations, the company falsely labeled its imports as raw materials while they were finished goods. A forensic audit in December 2015, showed that Bidco had an unpaid duty and Value Added Tax between 1992 and 1998 was about Sh4.3 billion.

A whistleblower provided a letter to the Ministry of Finance accusing the firm of “processing of HDPE is not done by yourselves” and that the company’s actions were “against the intent of this (tax exemption) provision as spelt out by Legal Notice No. 146 of 10th June 1993” of the Customs and Excise Regulations. Therefore this office has no option (but) to cancel your request and advise you accordingly,” the letter said.

But instead of paying the taxes due, Bidco has chosen the path of fighting in court to prolong the battle.

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