Shapo Trading And Yulees Blooms Exposed: Chinese-Linked Firms Face Ksh 400 Million Tax Evasion Probe Over Illegal Cigarette Imports

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Authorities are investigating Shapo Trading Limited and Yulees Blooms Company, two firms reportedly linked to Chinese investors, over an alleged tax evasion scheme involving cigarette imports worth approximately Ksh 400 million.

The Kenya Revenue Authority (KRA) and the Directorate of Criminal Investigations (DCI) are collaborating in this probe, aiming to understand how these companies managed to bring in large quantities of cigarettes without using Electronic Tax Registers (ETR) and without affixing required excise duty stamps on the packages.

Initial findings suggest that these companies may have imported and stored around 200 cartons of untaxed cigarettes in Nairobi warehouses, with about 40 of these cartons suspected to have been smuggled into neighboring countries.

Reports indicate that certain Kenyan government officials may have been involved, potentially aiding the companies in bypassing regulatory checks, which could explain how the large shipments went undetected for some time.

Investigators are tracking leads to ascertain whether corruption within government ranks facilitated this operation, reflecting ongoing challenges in enforcing Kenya’s tax compliance.

The tax evasion issue is especially significant in light of recent financial setbacks reported by KRA. Kenya’s tax collection in October 2024 saw a substantial decline across several revenue streams, including import duty, VAT, PAYE, and excise duty on domestic goods like tobacco.

KRA attributes these declines to multiple factors, including reduced imports and certain tax cuts.

Illicit trade especially in high-duty products like cigarettes has intensified these revenue shortfalls, costing the government substantial potential revenue.

This illicit trade is compounded by Kenya’s existing struggle to maintain stringent controls on excise tax stamps, which secure traceability in products susceptible to counterfeiting, such as tobacco.

The World Bank underscores the need for effective excise management systems, advocating for enhanced track-and-trace technologies to combat tobacco smuggling and tax evasion.

Kenya’s Electronic Goods Management System (EGMS) has previously improved compliance in the tobacco sector, yet cases like Shapo Trading and Yulees Blooms show that certain importers still find ways to bypass this system.

Furthermore, Kenyan farmers and local businesses are also disadvantaged by these smuggling operations, as illicit imports threaten the domestic market by undercutting prices and evading quality control regulations.

Investigators are reportedly looking deeper into the ownership structures of these companies and their ties to influential individuals in Kenya and China.

However, representatives from both companies have stated they are in compliance with Kenyan law, declining further comment on the allegations.

This case reflects Kenya’s ongoing struggle with the black market and tax avoidance in its tobacco industry, which continues to harm lawful businesses and diminish public revenues.

This incident, coupled with KRA’s recent revenue shortfall, signals the need for Kenya to strengthen its enforcement against illicit trade while closing administrative loopholes that enable smuggling and tax evasion.

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