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Choppies loses out in Sh173m tax dispute

THE STANDARD INSIDER
By Dominic Omondi | April 24th 2020

Choppies Enterprises Ltd, a retail chain with origins in Botswana, has lost its bid seeking to compel the taxman to unfreeze its accounts over a Sh173.4 million tax dispute.

Choppies, which has since exited the Kenyan market following a poor run, had moved to court seeking the order, pending resolution of the case.

However, High Court judge David Majanja dismissed the application with costs to Kenya Revenue Authority (KRA).

KRA froze the accounts after it realised that the retail chain, which got a foothold in Kenya by acquiring Ukwala Supermarkets Ltd, was in the process of winding up its business in Kenya. The tax agency argued that the cash-strapped retailer had already sold its branches, assets and stocks to Tusker Mattresses Supermarkets, Chandarana Supermarkets, Quickmart Supermarkets and Appmatt Ltd without informing it despite the ongoing tax dispute.

“Choppies was faulted for not disclosing their financial position; they did not disclose how much was held in their accounts and what would be realised from the sale of their assets,” said Paul Matuku, a commissioner in charge of legal services at KRA.

The court ruled that Choppies should provide security for taxes payable to KRA since it had closed shop in the country.

Further, the court gave the retailer and KRA 14 days to explore an amicable settlement of the tax dispute.

Nakumatt is another retail chain that went down with billions in unpaid taxes. Besides owing creditors, including landlords and suppliers as much as Sh40 billion, the erstwhile retail chain owes KRA about Sh2.3 billion.

With revenues declining due to the difficult economic environment, which has been compounded by the coronavirus pandemic, KRA has resorted to enforcing compliance to optimise its collection.

Yesterday, the taxman also directed business owners trading on digital platforms to charge value-added tax (VAT) on their transactions and remit the taxes.

In a statement, the Commissioner for Domestic Taxes Elizabeth Meyo expressed concern that some digital business owners are not charging VAT as required by law.

“All non-compliant traders are hereby advised to comply to avoid penalties and interests on outstanding taxes failure to which appropriate action will be taken in accordance with the law. Where fraud will be detected, appropriate criminal proceedings shall be bought against the offenders,” said Meyo. KRA is under pressure to aggressively collect taxes against a tough business environment, with the economy expected to suffer as a result of the coronavirus pandemic that has driven firms into bankruptcy.

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