Clear The Air News Tobacco Blog Rotating Header Image

December 22nd, 2015:

Raising Tobacco Tax Substantially to Lower Smoking Prevalence

Download (PDF, 1019KB)

Raila entangled in BAT’s grand bribery of senior KRA officials

http://www.businessdailyafrica.com/Raila-entangled-in-BAT-s-grand-bribery-of-senior-KRA-officials/-/539546/3005584/-/1154ooqz/-/index.html

From left, former Prime Minister Raila Odinga and former acting PS Andrew Mondoh. Whistleblower Paul Hopkins says senior officials in Mr Odinga’s office ordered the KRA to freeze multi-million shilling tax demands issued to Mastermind Tobacco. PHOTO | FILE

From left, former Prime Minister Raila Odinga and former acting PS Andrew Mondoh. Whistleblower Paul Hopkins says senior officials in Mr Odinga’s office ordered the KRA to freeze multi-million shilling tax demands issued to Mastermind Tobacco. PHOTO | FILE

IN SUMMARY

According to Mr Hopkins, Mr Odinga’s office ordered the KRA to freeze multi-million shilling tax demands issued to Mastermind Tobacco – the maker of the Supermatch brand of cigarettes.
Mr Odinga’s office wrote to the then KRA boss Michael Waweru asking him to immediately suspend agency notices issued to Mastermind Tobacco’s bankers, according to a letter seen by the Business Daily.

Former Prime Minister Raila Odinga has become the latest high-ranking politician to be entangled in the ongoing revelations of bribery involving British American Tobacco (BAT), Kenya Revenue Authority (KRA) officials and Mastermind Tobacco.

Whistleblower Paul Hopkins says in his latest revelations to a British newspaper the Independent that high-ranking officials in Mr Odinga’s office intervened to stop the KRA from freezing Mastermind’s accounts over non-payment taxes worth billions of shillings.

Mr Hopkins told the UK newspaper that the senior officials in Mr Odinga’s office ordered the KRA to freeze multi-million shilling tax demands issued to Mastermind Tobacco – the maker of the Supermatch brand of cigarettes.

“When KRA wrote to Mastermind’s bankers threatening to freeze accounts until the outstanding amounts were paid, officials in the office of former Kenyan Prime Minister Raila Odinga stepped in and ordered them to suspend the demands,” the report says.

Mr Hopkins, who worked for BAT in Africa for 13 years, has admitted to offering KRA officials hefty bribes for access to rival Mastermind Tobacco’s tax files and directing the taxman to demand the amounts due.

Mr Odinga’s office wrote to the then KRA boss Michael Waweru asking him to immediately suspend agency notices issued to Mastermind’s bankers, according to a letter seen by the Business Daily.

“You are requested to put on hold the enforcement action you have instituted against Mastermind Tobacco Kenya Limited in order to facilitate further review of the matter,” says the letter dated May 4, 2010 and signed by Andrew Mondoh, who was the acting permanent secretary in Mr Odinga’s office.

Mr Odinga in October appointed Mr Mondoh to lead a team of administrative advisers working in his private office as he prepares for the 2017 presidential poll.

The involvement of Mr Odinga’s office in the BAT bribery scam are contained in a dossier Mr Hopkins forwarded to the UK’s Serious Fraud Office (SFO), according to the Independent.

Mr Odinga was yet to respond to our queries by the time of going to press.

Meddling

Mr Odinga is no stranger to allegations of his meddling in tax matters having faced a similar storm in April 2012 when an MP accused him of meddling in the KRA’s affairs in order to shield Mastermind from paying its rightful share of taxes.

The then Mutito MP Kiema Kilonzo filed a question in the House seeking to know whether Mastermind had been remitting taxes to the KRA since 2007 and accused Mr Odinga, then Prime Minister, of shielding the cigarette firm from paying taxes.

“The court case that exists challenges issues up to April 2010. What about penalties, taxes and interest thereafter? I table a letter from the PM instructing that the company’s taxes should not be collected,” Mr Kilonzo told the House.

But then Finance assistant minister Oburu Oginga, who is Mr Odinga’s elder brother, hit back, saying Mr Kilonzo had on two occasions demanded Sh6.6 million from Mastermind to drop the question — suggesting that Mr Kilonzo had attempted to extort money from the tobacco firm.

Mr Kilonzo was in August last year appointed Kenya’s first ever ambassador to Turkey.

The KRA yesterday confirmed having received the letter from the former PM’s office, saying it did not in any way affect its pursuit of Mastermind for taxes.

“In the particular case of the letter from the former PM, KRA is aware that such a letter was written, but it had no influence whatsoever on the tax demands,” the KRA said in a statement.

The taxman declined to provide details on how many other orders from the PM’s office it received seeking to stop collection of taxes, citing rules of confidentiality.

“The law prohibits KRA from divulging details regarding the affairs of any taxpayer,” said the KRA statement.

The claims that the KRA has been acting on the whims of top bureaucrats and multinationals instructing the agency on tax matters come in the wake of the agency’s failure to meet revenue targets in the first quarter (July- September) of the current fiscal year. The Treasury has partly blamed the revenue shortfall for the recent cash crisis in government.

President Uhuru Kenyatta has responded to the crisis by ordering a lifestyle audit of all KRA employees in an effort to stop rampant corruption in the agency that costs the State billions of shillings in revenue leakages.

The KRA further argued in response to our queries that its acrimonious tax battle with Mastermind was before court, making it difficult for the agency to comment on the matter.

“A significant proportion of tax demands against Mastermind are the subject of court cases, and so any comment on them must take this into account,” the KRA said.

 

Mr Odinga, who served as Prime Minister between 2008 and 2013, now becomes the fifth Kenyan to be named in the mounting allegations that BAT operated an elaborate bribery scheme involving tax officials, legislators, rival company insiders and the United Nations representatives — all aimed at crippling rival Mastermind’s operations.

According to the Independent report, former Justice minister Martha Karua allegedly received £50,000 from BAT in bribes to block a rival firm from winning a multi-million pound contract at the KRA meant to fight smuggling of tobacco products.

Ms Karua has disputed the sum of cash received and its purpose, saying she received a Sh2 million “donation” to her presidential campaign.

“At no time did I ever discuss the award or influence of contracts/tenders whether at KRA or indeed within any other government entity with Paul [Hopkins] or anyone else,” Ms Karua said in response to the allegations.

The BAT bribe was supposedly paid to Ms Karua through her aide Mary M’Mukindia, currently a board member at the KRA.

Ms M’Mukindia, a former chief executive at State-owned oil marketer Nock, served as campaign adviser and fundraiser for Ms Karua’s unsuccessful presidential bid in 2013.

Julie Adell-Owino, a former BAT Kenya lobbyist, also left his job at East African Breweries (EABL) early this month after she was accused of organising payment of bribes to senior government officials, including former Trade minister Moses Wetang’ula, for reasons that were not explained.

Ms Adell-Owino resigned from EABL where she had taken a new job, indicating that the Diageo-owned brewer did not want to be associated with the corporate upheaval at BAT.

Islamic fatwa declared on e-cigs: Vaping is forbidden for Muslims, declares chief Malaysian cleric

http://www.dailymail.co.uk/news/article-3370008/Islamic-fatwa-declared-e-cigs-Vaping-forbidden-Muslims-declares-chief-Malaysian-cleric.html

• Smoking e-cigarettes has now been declared ‘haram’ in Malaysia
• A fatwa has been issued forbidding Muslims from using them
• An estimated 2.6million people in the UK use e-cigarettes

E-cigarettes and vaping has been declared ‘haram’ – forbidden for Muslims – in Malaysia, its national fatwa council announced Monday.

A fatwa has been issued after a special meeting of Malaysia’s National Fatwa Council, stating vaping is equal to drinking poison.

Electronic cigarettes are already banned for Muslims in four Malaysian states, as well as several other Muslim countries, including Kuwait and the United Arab Emirates.

The council finds that the consumption of something that is harmful, whether direct or indirectly, purposely or not, could lead to harm or death; so this will not be allowed,’ Dr Abdul Shukor Husin, chair of the council said at a press conference.

‘E-cigarettes and vapes are categorised as repulsive due to its harming effects and bad smell,’ Dr Shukor Husin added according to the IBTimes.

‘They also have an element of wastage, which is by spending money on things that are harmful and non-beneficial.’

‘We are seeing women and school children showing interest in vape. The decision is made to prevent an unhealthy culture from spreading to future generations.’

An estimated 2.6million people in the UK use e-cigarettes, which provide a nicotine hit without the cancer-causing chemicals found in tobacco.

Research published earlier this year found that teenagers who use e-cigarettes are four times more likely to end up smoking ‘real’ cigarettes.

American researchers said unregulated electronic cigarettes which are advertised on TV and in magazines serve as a gateway to smoking for teens and young adults.

Results showed 38 per cent of e-cigarette users had started smoking traditional cigarettes within a year compared to just ten per cent who had not used an e-cig.

Earlier this month, it emerged that a type of e-cigs will soon be available on the NHS for smokers trying to quit alongside patches and gums. A review recently declared them 95 per cent safer than the real thing.

E-CIGARETTES: DEVICES THAT ARE 95 PER CENT SAFER THAN TOBACCO

Q: What are e-cigarettes?

A: E-cigarettes, also known as personal vaporisers (PV) or an electronic nicotine delivery system (ENDS), give users a nicotine hit without burning tobacco leaves.

When the user sucks on the e-cigarette, liquid nicotine is vaporised and absorbed through the mouth.

When they breathe out, a plume of what appears to be smoke is emitted but it is actually largely water vapour.

A battery-powered heating coil heats the liquid to form the vapour, with some of the designs involving a pressure sensor that is activated by the user taking a puff, while others have a button to heat them automatically.

Q: How popular are they?

A: Inventor Hon Lik was the first to have his idea patented in his native China in 2003, and it has since become an industry worth around £2 billion. Anti-smoking group Ash estimates there are now 2.6 million vapers in the UK.

Q: Are they all the same?

A: No. There are a huge variety of products on the market, and hundreds of different flavours.

Cigalikes were the first kind of e-cigarettes, designed to look as much like a traditional cigarette as possible in order to make them more appealing to smokers.

They use either disposable or replaceable cartridges.

Because they are so small they can only be fitted with low-capacity batteries and need to be recharged more often than the larger tank-type e-cigarettes that were later developed and which can be refilled with ‘e-liquid’.

Cigalikes are often regarded as the ‘entry level’ to vaping, before users move on to larger models.

Q: What are the health risks?

A: Numerous studies have been carried out, but as e-cigarettes are such a new product they can only look at the short-term effects. Public Health England (PHE) said that experts have calculated vaping to be at least 95 per cent less dangerous than smoking – or alternatively that smoking is 20 times more dangerous than using e-cigarettes.

While cigarettes contain carcinogens and other toxic chemicals contained in tar from tobacco, e-cigarettes do not burn tobacco and so avoid delivering these substances.

The main health issues surrounding e-cigarettes concern other ingredients, contaminants and by-products, which can generate some toxicants – but these are at the very low levels found in the air that people generally breathe.

Q. Should people switch immediately?

But while e-cigarettes are far less dangerous than conventional cigarettes, health experts are not encouraging people to take up the habit for the sake of it.

The emergence of e-cigarettes has given way to fears that they will act as a gateway to smoking conventional cigarettes among those who have never smoked – particularly children – but there is no evidence to support this.

Although many youngsters report having tried vaping, as Professor Peter Hajek, director of the Tobacco Dependence Research Unit at Queen Mary, University of London, and a co-author of the PHE report, said: ‘People who are attracted to e-cigarettes are the same people who are attracted to smoking. ‘People who drink white wine are more likely to try red wine than people who do not drink alcohol.’

KRA invites EACC to probe BAT bribes allegations

http://www.the-star.co.ke/news/2015/12/22/kra-invites-eacc-to-probe-bat-bribes-allegations_c1264745

KRA will work with the anti-graft agency to ensure full and proper details are availed in a probe into the BAT scandal.

Commissioner general John Njiraini said the Authority held discussions with EACC after media reports highlighted “alleged unethical relations between staff of BAT and unspecified staff at KRA”.

“We shall work with EACC to ensure full and proper details are availed and support further investigatory work as required,” he said.

KRA was mentioned in the controversial BAT scam after one of its employees, Mary M’Mukindia, was claimed to have been the conduit for a Sh7.5 million alleged bribe paid to Narc-Kenya leader Martha Karua presidential campaign.

Karua has denied the allegations.

The Authority refuted claims M’Mukindia was their employee.

The Commissioner general said they contacted Paul Hopkins, who was allegedly used by BAT to pay Karua, seeking information on the claims and the identities of those involved.

“The authority has contacted the BBC, who assisted by providing Paul Hopkins contacts, the key person behind the allegations,” Njiraini said in a statement on Tuesday.

“Mr Hopkins responded indicating his preference to avail the information to an independent third party,” Njiraini said.

The commissioner further said they contacted EACC seeking to hand over Hopkins’ contacts for investigations.

He said UK’s Serious Fraud Office had offered to assist with the securing the information required.

“The Fraud office is keen to work with the commission in addressing high range motor vehicle smuggling as evidenced by recent interceptions at the Port of Mombasa,” he said.

In regard to allegations that BAT sought “to obtain confidential KRA tender documents to assist in their bidding”, Njiraini said the Authority was “not aware of any attempts made by BAT to influence past tendering processes”.

“BAT Kenya, as an entity, has not tendered for the supply of Excise Tax Stamps, in any of the tenders floated by KRA in the past,” he said.

“The present tender for the supply of Stamps and related management systems was awarded to SICPA Security Solutions, SA in December 2012, who emerged the winner out of 21 bidders.”

Systematic undermining of tobacco control

Download (PDF, 689KB)

The International Tax and Investment Center (ITIC)

Download (PDF, 2.19MB)

UAE looks at levying fee for remittances

http://www.thenational.ae/uae/uae-looks-at-levying-fee-for-remittances

ABU DHABI // Expatriates may be asked to pay a government tax on money they send back home.

The Minister of State for Financial Affairs, Obaid Al Tayer, said on Tuesday a study was under way on whether to levy a charge on remittances.

“It is in its first stages,” Mr Al Tayer said. “No decision has been made with regards to this.”

He said further studies would be needed on factors including social and economic effects, and that a draft law had yet to be considered.

The UAE is also looking at doubling the tax on tobacco by 2017, in line with the GCC, and reviewing corporate tax laws.

And a Gulf-wide value-added tax could be in place within three years after the six countries adopted a draft framework in May.

But Mr Al Tayer ruled out introducing income tax.

“There is not any intention or study regarding placing taxes on the incomes of individuals at all. There is not any draft law or decision regarding this matter,” he said.

“As per the constitution, no tax will be imposed without a law. This is a clear clause.”

Mr Al Tayer on Tuesday appeared before the Federal National Council, which passed the federal budget for next year.

Forecast revenues for the year will reach Dh48.57 billion, as will expenditure.

The FNC also discussed the tobacco tax, which member Abdul Aziz Al Zaabi said would generate Dh6bn a year after it was increased. Levied on importers, it will double to 200 per cent of import duty by the start of 2017. The extra revenue will go into the federal budget, not the emirates’ budgets as it does now.

“Just by the UAE entering the GCC Customs union, there was a cancellation of the law issued in 1981 regarding tobacco tax, which said that the 100 per cent is divided between local and federal governments,” Mr Al Tayer said.

“Therefore, the federal government does not receive a mentionable amount.”

Mr Al Zaabi argued that on top of tobacco revenues, emirates other than Abu Dhabi and Dubai should start contributing to the federal budget, and resources other than oil should be used to finance it.

Mr Al Tayer said that all local governments would have to contribute the extra tobacco tax revenue to the federal coffers.

The value-added tax is not expected before 2018, if it is approved, and even then there will be a trial period of at least 18 months so businesses can become accustomed.

Mr Al Tayer would not speculate on the percentage of tax levied on products or what has been agreed on already, but he said “the picture will become clear for everyone” in the first quarter of next year.

This month the Ministry of Finance said 94 basic food items would be exempt from the tax, as would health care, education and social services.

Meanwhile, the draft law for corporate tax is in its preliminary stages and discussions are continuing, although Mr Al Tayer stressed that “no agreement has been reached until now”.

He told the FNC that the decreasing oil prices did not affect the budget that was approved in July.

“The federal budget is not connected with the price of oil, because the revenues of the budget are financed by contributions from the emirates of Abu Dhabi and Dubai,” Mr Al Tayer said.

Kenya: BAT Scandal – Raila Tried to Stop KRA From Freezing Mastermind Tobacco Accounts

http://allafrica.com/stories/201512230281.html

Raila Odinga “intervened” to stop Kenya Revenue Authority from freezing Mastermind Tobacco Kenya’s accounts over non payment of taxes amounting to billions.

In the letter dated May 4, 2010, the office of the Prime Minister wrote to then KRA boss Michael Waweru to “immediately suspend notices issued to Mastermind Kenya asking for payment within 50 days”.

Raila was Prime Minister at the time.

“You are requested to put on hold the enforcement action you have instituted against Mastermind Tobacco Kenya Limited in order to facilitate further review of the matter,” read the letter signed by acting PS Andrew Mondoh.

“Meanwhile, a meeting to discuss is scheduled to be held on May 12, 2010, at 10am, between your office, Treasury and Mastermind Kenya Limited on the 14th floor boardroom, Treasury building.”

This comes after former BAT employee Paul Hopkins admitted offering KRA officials hefty bribes for access to rival Mastermind’s tax files and directing the taxman to demand the amounts due.

The Independent reported Hopkins, who headed the Anti-illicit Trade team, ran a “sophisticated corporate spying operation involving “black ops” to put rival cigarette makers out of business”.

Early Tuesday, Kenya Revenue Authority said it will work with the anti-graft agency to ensure full and proper details are availed in a probe into the BAT scandal.

KRA was mentioned in the controversial BAT scam after one of its employees, Mary M’Mukindia, was alleged to have been the conduit for a Sh7.5 million alleged bribe paid to Narc-Kenya leader Martha Karua presidential campaign.

Karua denied the allegations while the Authority refuted claims M’Mukindia was their employee.

Commissioner general John Njiraini said the Authority held discussions with EACC after media reports highlighted “alleged unethical relations between staff of BAT and unspecified staff at KRA”.

In regard to allegations that BAT sought “to obtain confidential KRA tender documents to assist in their bidding”, Njiraini said the Authority was “not aware of any attempts made by BAT to influence past tendering processes”.